FY 2012 Economic Forecast - Office of Management and Budget Year Budgets/Operating...Overview Governor Chafee recommends a budget for fiscal year 2012 totaling $7.661 billion in all

Executive Summary

Table of Contents Page Overview ...................................................................................................................................................... 1 The Governor’s Revenue Program............................................................................................................... 8 The Economy .............................................................................................................................................. 17 General Revenues, Restricted Receipts and Other Sources ....................................................................... 20 Unemployment Insurance ........................................................................................................................... 28 Transportation Funding............................................................................................................................... 31 Municipal Accountability, Stability, and Transparency Fund ................................................................... 33 Retirement System Funding........................................................................................................................ 35 All Sources .................................................................................................................................................. 38 All Expenditures.......................................................................................................................................... 39 General Government ................................................................................................................................... 41 Human Services........................................................................................................................................... 57 Education..................................................................................................................................................... 75 Public Safety ............................................................................................................................................... 83 Natural Resources ....................................................................................................................................... 97 Transportation ........................................................................................................................................... 105 Five-Year Financial Projection FY 2012 – FY 2016 Overview ....................................................................................................... 115 General Revenue Out-year Estimates FY 2012 – FY 2016........................................................... 124 General Revenue Out-year Estimates............................................................................................. 125 General Revenue Expenditure Estimates ....................................................................................... 127 General Revenue Out-year Planning Values.................................................................................. 128 Appendix A - Schedules General Revenue Budget Surplus Statement.....................................................................................A-1 Expenditures from All Funds.............................................................................................................A-2 Expenditures from General Revenues ...............................................................................................A-4 Expenditures from Federal Funds......................................................................................................A-6 Expenditures from Restricted Receipts..............................................................................................A-8 Expenditures from Other Funds.......................................................................................................A-10 Full-Time Equivalent Positions .......................................................................................................A-12 General Revenues as Recommended...............................................................................................A-14 Changes to FY 2011 Enacted Revenue Estimates...........................................................................A-15 Changes to FY 2012 Adopted Revenue Estimates..........................................................................A-16 General Revenue Changes to Adopted Estimates ...........................................................................A-17 Other Revenue Enhancements .........................................................................................................A-19 Appendix B - Changes to FY 2011 Changes to FY 2011 Enacted General Revenue Budget Surplus ..................................................... B-1 Changes to FY 2011 Enacted Agency General Revenue Expenditures ........................................... B-2 Changes to FY 2011 Enacted General Revenue Expenditures ....................................................... B-21 Appendix C – Aid to Cities and Towns Formula Aid to Cities and Towns...................................................................................................... C-1 Fiscal Year 2011 State Aid to Cities and Towns............................................................................... C-3 Change in State Aid – FY 2011 Revised vs. FY 2011 Enacted........................................................ C-5 Fiscal Year 2012 State Aid to Cities and Towns............................................................................... C-7 Change in State Aid – FY 2012 vs. FY 2011 Revised ..................................................................... C-9 Appendix D – Aid to Schools Education Aid to Local Units of Government...................................................................................D-1

Overview Governor Chafee recommends a budget for fiscal year 2012 totaling $7.661 billion in all sources of funds, a decrease of $450.0 million, or 5.6 percent, from the recommended all funds FY 2011 revised budget of $8.111 billion. Of this total, $3.170 billion, or 41.4 percent, is from general revenue, $2.557 billion, or 33.4 percent, from federal funds, $1.725 billion, or 22.5 percent, from other sources, and $209.5 million, or 2.7 percent, is from restricted or dedicated fee funds. Recommended general revenue funding of $3.170 billion represents an increase of $204.5 million, or 6.9 percent, over the recommended FY 2011 revised budget of $2.965 billion. Federal funds decrease from $3.011 billion in the FY 2011 revised budget to $2.557 billion in the recommended FY 2012 budget, due primarily to the loss of stimulus-related funding. Other funds also decrease from $1.956 billion to $1.725 billion, due primarily to the loss of unemployment insurance funding provided by the Federal Government.

The significant challenge posed by the projected $295.0 million budget deficit in FY 2012 is a result of both long-term structural imbalances between the projected growth in revenues and expenditures, as well as losses totaling $233.3 million in federal stimulus funds for Medicaid and local educational programs. Governor Chafee’s FY 2012 Budget is based upon his goal to

restore fiscal stability to Rhode Island’s finances, while cognizant of the challenges facing our local governments. Solving the state’s long-term fiscal imbalance requires fundamental changes to the state’s revenue stream and high growth spending programs that drive the budget. Therefore, the Governor’s FY 2012 Budget presents a comprehensive plan that brings the operating budget into balance without relying heavily on one time resources and reduces the projected out year deficits by addressing the high growth expenditures in Human Services programs. The deficit resolution in FY 2012 is derived roughly equally from increased revenues and expenditure reductions. These actions are necessary to ensure that future generations have a government capable of providing essential government services in a cost-effective manner.

FY 2012 Budget Restores Fiscal

Stability

The FY 2012 Budget includes proposed changes to the sales tax and corporate tax structures that will place Rhode Island in a more competitive position with respect to state tax rates. The sales tax modernization plan proposes to impose a one percent tax on most items previously exempt from the sales tax, and expand the base to include items not previously taxed, such as services. This modernization plan provides for an increased revenue flow which is forecast to be less susceptible in economic downturns, while lowering the current sales tax rate from seven percent (7.0%) to six percent (6.0%). This will make Rhode Island more competitive by placing our rates at or below those of our neighboring states. The one percent sales tax will sunset upon enactment by Congress of the Main Street Fairness Act or other legislation that requires remote sellers to collect sales and use taxes on behalf of the State Such legislation will allow Rhode Island to recapture sales tax lost to Internet sales and protect the investments of Rhode Island’s bricks and mortar retail businesses. The FY 2012 Budget promotes fairness and equity in Rhode Island’s sales tax structure.

Tax Policy Initiatives

Will Place Rhode Island in Competitive

Position

The corporate tax proposal modifies the minimum tax by lowering it for most taxpayers, institutes combined reporting, and phases out one of Rhode Island’s largest tax expenditures, the preferential rate provided under the Jobs Development Act. The state’s corporate income tax rate will be lowered over a three year period from nine percent (9.0%) to seven and one-half percent (7.5%). These changes will make the state corporate tax structure more transparent and fair and will place Rhode Island’s rate at or below our neighboring states.

1

Overview

In addition to addressing the persistent structural operating deficit, this budget plan also resolves the funding crises in the state’s Unemployment Trust Fund and the Department of Transportation’s capital program. The plans to resolve these funding dilemmas would be implemented over a multi-year period, and would finally address issues that have plagued Rhode Island for years. Governor Chafee’s budget also includes a new program to address the underfunding of

certain local government long term obligations, including pension plans and funding for Post Employment Benefits Other Than Pensions (OPEB). The program would reward local governments that take steps to appropriately fund these obligations and penalize communities that do not. The new Municipal Accountability, Stability and Transparency (MAST) Fund is designed to encourage local governments to focus on determining the sustainability of current plans and providing increased funding to these obligations where inadequately funded. Additionally, the Governor proposes to require members of the State Employees and Teachers Retirement Plan, State Police Retirement plan, and Judges Retirement plan to pay increased contributions to reduce the unfunded liability of those plans, while the State investigates the need to develop a more sustainable system that provides for a formula driven sharing of the actuarially required contributions. This will result in an additional $40.7 million of increased assets flowing into the fund.

FY 2012 Budget Presents

Disciplined Plans to Address Funding

Dilemmas at State and Local Levels

While revenues are expected to grow by 6.8 percent or $206.1 million in FY 2012 compared to the FY 2011 revised budget, expenditures, if unconstrained, would grow by 12.1 percent or $332.7 million. Growth in social service programs, (including unfavorable changes in federal Medicaid participation due to the end of the stimulus program costing Rhode Island an estimated $215.4 million), scheduled increases in local aid programs, and public employee pensions and benefits,

resulted in an initially projected budget gap of approximately $295.0 million. Additional spending requirements identified during the budget development process, increased the projected deficit to over $331.9 million. This increased spending includes the Governor’s commitment to fully fund the new education aid funding formula (requiring an additional $7.5 million above previous estimates) and reversing the trend of reduced funding for Higher Education (requiring an additional $6.7 million).

FY 2012

Recommended Budget

The challenge of balancing the State Budget is more daunting upon a review of where overall general revenue actually goes. Expenditures from general revenue are projected to total $3.2 billion for FY 2012. By function, spending by Human Services agencies represents the largest share with expenditures, totaling $1.260 billion, or 39.8 percent, of the general revenue budget. This supports health care and prescription drug coverage for low-income children, their parents, seniors and the poor, and community residential and treatment programs for the disabled. This is followed by spending for Education, which totals $1.054 billion, or 33.2 percent, and includes local education aid, support for the university and colleges, and scholarships. General revenue expenditures for General Government and Public Safety comprise $414.4 million (13.1 percent), and $402.2 million (12.7 percent), respectively. General Government includes, along with state operations, state aid to municipalities and direct property tax relief. Finally, expenditures for Natural Resources comprise $40.0 million, or 1.2 percent of total general revenue spending. Transportation expenditures are financed by dedicated gasoline taxes and are not a component of general revenue spending.

2

Overview General revenue expenditures by category are primarily devoted to financing grants, local aid and personnel. The largest component is grants and assistance expenditures of $1.125 billion, comprising 35.5 percent of total general revenue spending. Local aid expenditures of $895.3 million represent 28.2 percent of total spending; personnel expenditures of $841.8 million comprise 26.6 percent of the budget; operating expenditures total $132.0 million, or 4.2 percent of the budget; and capital expenditures, including debt service, total $168.8 million, or 5.3 percent of the total general revenue budget. Compared to the recommended FY 2011 revised budget, FY 2012 personnel expenditures increase by $43.6 million or 5.5 percent; operating expenditures increase by $1.7 million or 1.3 percent; local aid expenditures increase by $21.2 million or 2.4 percent; capital expenditures, including debt service, decrease by $7.3 million or -4.1 percent.

Shared Sacrifice Will Lead

to a More Sustainable Budget in the Future

Year after year, Rhode Island’s budget process has included feverish efforts to offset non-recurring revenues to finance the growth in expenditures. The combined use of one-time revenues and the unrelenting pace of growth in entitlements and employee benefits has left the State with insufficient resources to reliably fund programs that are important to the citizens of Rhode Island. Important and necessary programs, such as local education aid, assistance for higher education, investments in technology and asset protection and many other issues cannot be addressed sufficiently and consistently, when certain areas of government grow at rates that significantly exceed general inflation and the rate of revenue growth. In recent years, local governments have experienced significant reductions in state aid as the state struggled to balance its budget. In addition, the state government workforce has declined by approximately 1,400 FTE positions or 9.2 percent since the start of FY 2007, and the cost of employer sponsored medical benefits for active employees and retirees has been increasingly shifted from the employer to the employee. Concessions were negotiated with employee unions in FY 2009, FY 2010, and FY 2011 to help balance those budgets. In the FY 2012 Budget, expenditure reductions fall primarily in the Human Services programs, which are those with the highest growth rates in recent years, yet have been the least impacted by reductions due to limitations placed on the state through the acceptance of stimulus funding. Some of the major highlights contained in the expenditures of the FY2012 Budget include:

• Investment in higher education to position Rhode Island for future job growth, through an increase of $10.0 million in the state’s contribution over the FY 2011 enacted level.

• Local education aid increases by a net of $13.2 million over the FY 2011 enacted budget, reflecting restoration of the stimulus funding, full financing of the new funding formula, withdrawal of the Education Jobs money in FY 2012 and increases in housing aid and teacher retirement funding.

• Reductions in the Human Services function totaling $60.5 million, which do not impact eligibility for programs, including service delivery systems change initiatives, restructuring of rates, and consolidation of publically managed facilities.

• A three percent reduction in salary costs in cabinet agencies reflecting constrained hiring, to be negotiated concessions or reductions in wages and benefits and prioritization of activities using performance-based budgeting for savings of $19.3 million.

3

Overview The FY 2012 budget proposal makes great strides towards eliminating the structural imbalance that has plagued the Rhode Island budget for the past decade, while ensuring the continuity of fiscal support of programs and services that balance the critical needs of the Rhode Island’s most vulnerable citizens and Rhode Island taxpayers. General revenue funding for local education aid increases by a net of $13.2 million in FY 2012, as compared to the FY 2011 enacted funding level. The Governor’s budget restores $17.6 million of education aid for expiring federal State Fiscal Stabilization Funding and provides $17.1 million for year one of the new funding formula. However, the Governor’s budget strategy for FY 2012 incorporates $32.3 million of general revenue reductions to local education aid that will be offset by the funding provided through the federal Education Jobs Fund. Including the availability of these federal funds, education aid provided to local communities, charter schools, and state schools in FY 2012 will be $726.3 million, or $18.0 million more than provided in the FY 2011 enacted budget, when State Fiscal Stabilization Funding is taken into account.

General Revenue Funding for Local

Education Aid totals $849.2 million

The Governor recommends full implementation of the new education funding formula in FY 2012 at a cost of $17.1 million. Beginning July 1, 2011, the formula will distribute education aid to all local educational agencies (LEA), including districts, charter schools and state schools (with the exception of the School for the Deaf, which will be separately funded). The formula allows for the funding to follow the student and was developed with the following guiding principles: build a strong foundation for all children, improve equity among districts and schools, be transparent, and be financially responsible. The new education aid formula determines the amount of funding each LEA shall receive per year. In order for each LEA to achieve its full level of year one funding, the Education Jobs Fund resources can be used to offset any general revenue reductions that occur in FY 2012. The Governor’s budget includes the best data available at the time of the budget submission; however these calculations will be updated using March 2011 student data, including final charter school lottery data, which is expected to be finalized by April 1, 2011. The enacted formula legislation also allowed for additional funding from the state to districts for certain categorical programs, including high-cost special education, career and technical education, early childhood programs, certain transportation costs, and a limited two-year bonus for regionalized districts. The Governor’s budget only recommends new funding for the transportation categorical and regionalized bonus, at a cost of $1.9 million, and level funding for the early childhood program in FY 2012, with the expectation that the other programs will be added in FY 2013. The Governor’s budget includes an additional $1.7 million as compared to the FY 2011 enacted funding level for school housing aid and funds the five percent increase in the minimum state share ratio for the school housing aid program. This minimum will increase to 35 percent for projects completed in FY 2011 that are eligible for FY 2012 housing aid. Total funding of $72.5 million is recommended for FY 2012. The State’s share of teacher retirement costs also increases by $7.1 million over FY 2011 enacted levels to $82.7 million. In addition to anticipated payroll growth, the required rate of contribution for the State share rose from 7.76 percent to 9.09 percent in FY 2012.

Restructuring Human

Services Programs In order to address the high growth in the human services programs, the Departments under the Executive Office of Health

4

Overview and Human Services (EOHHS) came together to coordinate their budget proposals to assure that they were consistent and actionable, and to avoid cross-departmental conflicts. This was the first time that many of the staff that participated in this effort collaborated in such an intensive interagency work process and it produced a number of ideas that will be applied to improve programs and services for FY 2012 and beyond. Several broad themes emerged from this effort. First are a series of service delivery systems change initiatives, all aimed at rationalizing and managing services supporting persons with behavioral health needs, persons with developmental disabilities, and children and youth in the child welfare system. Several of these initiatives will take advantage of opportunities to obtain enhanced federal matching funds under the new Medicaid Health Home option and/or Money Follows the Person Incentive Grants and the authority to use selective contracting, where appropriate, under the Global Waiver. Second, rates paid to nursing facilities, hospitals, and home health agencies will be re-structured, and the EOHHS departments will examine the opportunity to selectively contract for home health services. Third, operations at the Training School, the Veterans’ Home, and the publically managed group homes for persons with developmental disabilities will be consolidated or restructured, with no reduction in either census or staffing. Fourth, a number of structural and functional changes, across all Departments, will be undertaken, aimed at streamlining processes and improving allocation and prioritization of staff resources. Going forward into FY2013 and beyond, the EOHHS Departments face many strategic challenges, including: • Examining the implications of Federal Health Reform, as well as a series of federal

Maintenance of Effort requirements across all of the Departments; • Re-engineering Intake and Eligibility processes and identifying where they can be

consolidated or merged to better serve the consumer; • Defining the strategic future of the Rhode Island’s 24/7 service programs and the patient and

resident populations that they support; • Developing a thoughtful and comprehensive strategy for licensure to assure value for the

public and licensees alike. The efforts of the EOHHS agencies described above resulted in various proposals that will generate approximately $60.5 million in savings in FY 2012 that have been incorporated into the Governor’s recommended budget, with potentially greater savings in later years. In FY 2011, the Governor recommends a 50 percent increase in the $10.4 million appropriated for distressed communities in the enacted budget. Under this proposal, an additional $5.2 million will be distributed, for a total of $15.7 million in FY 2011. Currently, as a result of the indices established by Rhode Island

Additional State Aid to Distressed Local

Governments with Strings Attached

5

Overview General Laws 45-13-12, the following communities receive funds through the Distressed Communities Relief Fund: Burrillville, Central Falls, East Providence, North Providence, Pawtucket, Providence, West Warwick and Woonsocket (Based on current data, Burrillville and East Providence will no longer qualify going forward). In order to receive the additional state aid, distressed communities must submit a 5-year budget forecast to the Division of Municipal Finance by June 20, 2011 including underlying assumptions for the five year planning horizon. In FY 2012, the Governor recommends that $10.4 million be distributed under this program. Local governments are facing ever-increasing costs for retirement and retiree health care. These two components represent significant cost drivers for municipal budgets. Given this, Governor Chafee is proposing to create the Municipal Accountability, Stability and Transparency (MAST) Fund. The MAST Fund is designed to encourage local governments to focus on the sustainability of current plans and reduce the unfunded liability of significantly underfunded pension plans. In addition, the MAST Fund addresses the significant unfunded liabilities for Post Employment Benefits Other Than Pensions (OPEB). It is projected that this fund would total $19.3 million, which would be available for municipal governments. Distribution of the MAST Fund receipts to each community is based on the 2009 General Revenue Sharing percent distribution. Governor Chafee’s proposed FY 2012 budget includes an appropriation to the City of Central Falls over two years, $1.8 million in FY 2011 and $4.9 million in FY 2012. The City has been operating under the oversight of a State-appointed Receiver pursuant to An Act Relating to Cities and Towns – Providing Financial Stability, codified as Rhode Island General Laws § 45-9-1 et seq., since July 2010. In December 2010, the Receiver issued a report detailing the structural fiscal problems plaguing the City and outlining a variety of reform measures for consideration to restore the City to long-term fiscal stability. Since that time, the City’s FY 2010 audit has been completed, identifying an actual year-end deficit of $2.4 million. The Receiver has identified $623,000 in City assets which may be applied to reduce this deficit, leaving a balance of approximately $1.8 million. In addition, the Receiver forecasts a deficit of approximately $4.9 million for FY 2012 that must be resolved to avoid a liquidity crisis in early FY 2012. The City currently has severely limited access to financing and cannot otherwise raise the revenues necessary in the short term to resolve these deficits. The $6.7 million appropriation will eliminate these deficits and resolve the City’s projected liquidity problems for FY 2012. State personnel costs comprise 22.6 percent of total recommended spending in FY 2012. Actual filled positions totaled 13,781.2 as of February 12, 2011, a 195.5 position increase from the 13,565.7 filled position level as of January 2, 2010, but still 1,301.6 FTE below the 15,082.8 FTE level in July 2007. The filled level of 13,781.2 FTE is 1,046.4 FTEs (7.1 percent) less than the enacted cap of 14,827.6.

Personnel Funding and FTE Levels

In order to maintain an acceptable level of critical services and reflecting the availability of federal funds, the Governor recommends an increase in the number of full-time equivalent positions. From the FY 2011 enacted level, the Governor recommends an increase of 180.0 FTE positions bringing the new authorized level to 15,007.6 FTE. This increase is due to 46.0 new federally funded positions in the Department of Health, 22.0 federally funded positions for the administration of the Supplemental Nutrition Assistance Program (SNAP) and 10.0 positions for the Office of Rehabilitation Services/Disability Determination Services in the Department of Human Services, 22.0 positions in the Department of Elementary and Secondary Education financed with the Race to the Top federal grant, 65.0 positions at the Community College of Rhode Island and 6.0 federally funded firefighter positions within the Air National Guard section of the Military Staff.

6

Overview In FY 2012, the Governor recommends a total FTE level of 14,990.6, including 785.0 Higher Education federal/sponsored research positions, a net decrease of 17.0 FTE’s from the revised FY 2011 level, but a 163.0 increase from the FY 2011 enacted level. The reduction in FTE primarily occurs in the Department of Labor and Training due to the elimination of limited period positions whose funding under the American Recovery and Reinvestment Act will cease in FY 2012. The Department’s FTE level decreases by 36.8 in the Workforce Development program and by 5.5 in the Workforce Regulation program. The Department of Children, Youth and Families’ FTE level decreases by 29.0 positions due to projected attrition from facilities consolidation and system of care transformation implementation. Offsetting these decreases are 17.5 new professor positions at the Rhode Island College for accreditation requirements and 39.0 additional positions at the new Department of Veterans’ Affairs, including a new Director, benefit specialist staff and clinical staff due to an initiative that will result in an increased census at the Veterans’ Home. These new positions will be funded from restricted revenues resulting from the increased census.

The FY 2012 budget continues projects to improve State Government information technology by funding projects with statewide interest in the areas of: 1) revenue forecasting and collection through additional enhancements to the Division of Taxation’s data warehouse, 2) human resource management by implementing the first phase of the Oracle Human Resources

module, and 3) funding for an Internet-based data sharing application for use by local governments when reporting data to the Division of Municipal Finance. Rhode Island must strengthen its technology to enable an innovation economy and to solve the real problems of our day. The Governor recommends $11.5 million from the Rhode Island Capital Plan Fund (RICAP) over a four year period for the installation of the Human Resource module, followed by other modules that are part of the statewide financial management system. An additional $15.5 million is also proposed from the RICAP fund over a five year period for other technology initiatives throughout state government. Ongoing State government projects include a replacement of the outdated system presently used by the Division of Motor Vehicles ($12.8 million), enterprise infrastructure upgrades ($3.9 million), and integrated, web-based licensing capability ($1.0 million).

Focus on the Future-

Technology Infrastructure

7

The Governor’s Revenue Program

At the Budget Summit hosted by then Governor-elect Lincoln D. Chafee in December 2010, the general revenue deficits projected by the Budget Office and the Office of Revenue Analysis started at $295.0 million in FY 2012 rising incrementally to $457.8 million in FY 2016. The cause of these projected deficits is two-fold. First, general revenue expenditures shoot up by 10.5 percent in FY 2012, primarily due to the expiration of federal

stimulus monies, and then increase on average by 3.3 percent over the FY 2013 to FY 2016 period. Second, general revenues increase by only 0.5 percent in FY 2012, primarily due to the sluggish economic recovery, and then increase on average by 2.4 percent over the FY 2013 to FY 2016 period. To address this ongoing structural deficit, the Governor’s FY 2012 Budget proposes to reduce the rate of growth in general revenue expenditures by reforming those expenditure categories with the highest rates of growth and to halt the erosion of the state’s revenue base due to structural changes in the state’s economy while improving the state’s economic competitiveness.

Addressing the Structural Deficit

to Ensure a Future of Prosperity

During the 2010 session, the General Assembly passed and Governor Donald L. Carcieri signed into law historic tax reform legislation that significantly improved Rhode Island’s tax rate competitiveness as it pertains to the personal income tax. Governor Lincoln D. Chafee proposes to take the next step in this process through his Business Tax Competitiveness Proposal. The Business Tax Competitiveness Proposal is a multi-faceted approach that is designed to support all businesses in the state and make Rhode Island’s corporate tax rate competitive with neighboring states. The Governor’s Business Tax Competitiveness Proposal consists of five parts: (1) a phased-in reduction in the State’s business corporations tax rate beginning in tax year 2012; (2) a phased-in elimination of the Jobs Development Act rate reduction beginning in tax year 2012 for taxpayers that file under the business corporation tax; (3) the implementation of combined reporting for business entities subject to the business corporations tax effective for tax year 2012 and beyond; (4) the subjection of limited partnerships and limited liability partnerships to the state’s corporate minimum tax; and (5) a restructuring of the corporate minimum tax and the minimum franchise tax from a flat $500.00 for all filers to a graduated tax that is dependent on a business’ Rhode Island gross receipts.

Improving Rhode Island’s Business

Tax Competitiveness

Currently, Rhode Island’s business corporation (i.e., corporate income) tax rate is 9.0 percent, the highest in New England, similar to the situation Rhode Island found itself in with respect to the personal income tax prior to the passage of the reform last year. Rhode Island’s Jobs Development Act rate reduction is unique among the New England states and was used by only 14 taxpayers in tax year 2008. The Governor proposes to phase-out the Jobs Development Act over a three year period. The proposed incremental changes in the business corporation tax rate and the Jobs Development Act rate reduction are shown below:

Tax Year Business Corporation Tax Rate Change in Jobs Development Act2011 9.0 % Full Rate Reduction Available

2012 8.5 % 1/3 of Full Rate Reduction Eliminated



2015 and thereafter 7.5 % No Rate Reduction Available

8

The Governor’s Revenue Program The revenue loss to the State from the reduction in the business corporation tax rate from 9.0 to 8.5 percent for FY 2012 is estimated to be $8,525,365 while the revenue gain to the State from the elimination of one-third of the full Jobs Development Act rate reduction is estimated to yield $4,845,502.

The implementation of combined reporting for business corporation tax filers effective for tax years beginning on or after January 1, 2012 will bring Rhode Island’s corporate filing requirements in line with those of Maine, New Hampshire, Vermont and Massachusetts, with the latter two states adopting combined reporting filing requirements in 2006 and 2009 respectively. Combined reporting is also required by the federal government. Combined reporting will inure the State from tax planning activities engaged in by multistate corporations designed to shift income from higher corporate tax states to lower or no corporate tax states. The end result of these tax avoidance schemes is to shift the burden of state

corporate taxation from multistate national firms to local or regional companies that have a smaller national footprint. The Department of Revenue estimates that the implementation of combined reporting will generate $8,891,640 of additional revenue in FY 2012.

Combined Reporting Levels the Playing Field for Smaller

Regional Businesses Vis-à-vis Large

Multistate Corporations

The final planks of the Governor’s Business Tax Competitiveness Proposal are to treat businesses with similar limited liability protection equitably and to restructure the corporate minimum and minimum franchise taxes to lower the rate for small businesses. With respect to the treatment of businesses with similar limited liability protection, the Governor proposes to subject limited partnerships (LP) and limited liability partnerships (LLP) to the state’s corporate minimum tax putting these business entities on par with limited liability companies (LLC) and subchapter S corporations. With respect to the restructuring of the corporate minimum and minimum franchise taxes, the Governor proposes tiered minimum taxes based on a business’ Rhode Island gross receipts as follows:

Rhode Island Gross Receipts Business Structure Minimum TaxC-corporation $500

$0 to $999,999 S-corporation, LLC, LP or LLP $250

C-corporation $1,000,000 to $2,499,999

S-corporation, LLC, LP or LLP $1,000

C-corporation $2,500,000 to $4,999,999


C-corporation $5,000,000 and over


The Department of Revenue estimates that the revenue impact of the combined restructuring of the corporate minimum and minimum franchise taxes and the inclusion of limited partnerships and limited liability partnerships is a revenue loss of $6,117,310 in FY 2012. Taken as a whole, the net revenue impact of the Governor’s Business Tax Competitiveness Proposal is a revenue loss in FY 2012 of $905,533. The FY 2013 through FY 2016 revenue impact of the Governor’s Business Tax Competitiveness Proposal by each component and in combination is shown in the table below:

9


Proposal FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Rate Reduction Phase-In $ (8,525,365) $ (20,005,564) $ (33,967,968) $ (35,345,444) $ (36,466,135)

Jobs Dev Act Phase-Out 4,845,502 9,345,814 15,367,882 15,991,083 16,498,109

Combined Reporting 8,891,640 9,993,357 10,955,116 11,399,371 11,760,808

Minimum Tax Restructure (6,117,310) (6,166,843) (6,241,142) (6,290,675) (6,364,975)

Total $ (905,533) $ (6,833,236) $ (13,886,112) $ (14,245,665) $ (14,572,193)

The first state to impose a sales tax on the purchase of tangible personal property was Mississippi in 1932. Twenty-five other states had adopted a sales tax by 1938. Rhode Island put in place a 1.0 percent sales tax on July 1, 1947. Rhode Island’s sales tax rate was increased in FY 1952 to 2.0 percent, in FY 1958 to 3.0 percent, in FY 1965 to 3.5 percent, in FY 1966 to 4.0 percent, in FY 1968 to 5.0 percent, in FY 1977 to 6.0 percent, and in FY 1991 to 7.0 percent where it has remained. During this time period, a total of 82 exemptions to the sales tax have been

enacted into law with 20 of those 82 being enacted since 1992.

Ensuring That Rhode Island’s Revenue Base

Keeps up with Changing

Consumption Patterns

Goods and Services Expenditures as a % of Total PCEs

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

1947

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

Goods Services

Rhode Island’s sales and use tax applies to a base that is largely tangible personal property and a very small number of services (primarily telecommunication services). When Rhode Island’s sales tax was enacted spending on goods comprised 60.0 percent of total personal consumption expenditures (PCE), while spending on services made up the other 40.0 percent. By 1970 spending on services had surpassed

10

The Governor’s Revenue Program spending on goods. In 2009, spending on services was nearly 70.0 percent of total expenditures while spending on goods was 30.0 percent. In the mid- to late 1960s, the state sales tax rate was increased by two percentage points or 40.0 percent. These increases did not happen by accident but rather were the State’s attempt to maintain the revenue product from the sales tax in the face of a declining sales tax base. More recently, the growing popularity of remote sales that is purchases from vendors that do not have a physical presence in the state, has further eroded sales tax collections, as these vendors are not required to charge, collect and remit the sales tax on the state’s behalf. It is estimated that the revenue lost to Rhode Island from remote sales is approximately $70.4 million in 2012. As a means to shoring up the sales tax base from the erosion of the shift in consumption from goods to services and the increase in the number of transactions between Rhode Island consumers and remote sellers, Governor Chafee puts forth his Sales Tax Modernization Proposal. The Sales Tax Modernization Proposal has five component parts: (1) a reduction in the state sales tax rate to 6.0 percent; (2) a modernization of the sales tax base to include select services currently not subject to the sales tax and the removal of the current sales tax exemption for certain items with both to be taxed at the 6.0 percent rate; (3) a broadening of the sales tax base from the removal of the current sales tax exemption from certain items and the taxing of these items at a 1.0 percent rate; (4) maintaining the 8.0 percent tax rate for meals and beverages, currently consisting of the 7.0 percent state sales tax rate and the 1.0 percent local meals and beverage tax, with the 1.0 percent differential dedicated to the new Municipal Accountability, Stability and Transparency (MAST) Fund; and (5) retaining the 8.0 percent tax on lodging and room rentals, currently consisting of the 7.0 percent state sales tax and the 1.0 percent local hotel tax, with the incremental 1.0 percent allocated a new Tourism Asset Protection Fund.

The Proposed Sales Tax Rate of 6.0

Percent Will Be Lower than Massachusetts’ Rate of 6.25 Percent and Connecticut’s

Proposed Rate of 6.35 Percent

The reduction in the state sales tax rate from 7.0 percent to 6.0 percent will make Rhode Island’s sales tax rate lower than Massachusetts’ current state sales tax rate of 6.25 percent and lower than Connecticut’s proposed state and local sales tax rate of 6.35 percent. (Connecticut’s current general sales tax rate is 6.0 percent with no local option sales tax.) This reduction will provide Rhode Island based retailers of durable goods, particularly big ticket items such as motor vehicles, furniture and consumer electronics, with a competitive advantage over their counterparts in Massachusetts and Connecticut. The Department of Revenue estimates that the reduction in the sales tax rate to 6.0 percent will decrease revenues by $117,714,286 in FY 2012. The modernization of the sales tax base will allow the State to preserve its sales tax revenues in the face of increasing consumption by households and businesses of services relative to goods. In addition, removing the current exemption for certain items will help to restore the sales tax base by including more stable elements of consumption. The sales tax base modernization includes the following goods and services that would be subject to the state’s sales tax at a rate of 6.0 percent:

11

The Governor’s Revenue Program Goods Currently Exempt from Sales and Use Tax Prewritten computer software delivered electronically Corrective eyeglasses and contact lenses Nonprescription drugs including medical marijuana Newspapers Insurance proceeds from destroyed or stolen passenger car as trade-in allowance Property or supplies used in the processing or preparation of floral products and arrangements Services Currently Not Subject to Sales and Use Tax Garbage and trash collection including certain waste management and remediation services Taxicabs and other road transportation services Scenic and sightseeing transportation and support activities and package tours Couriers and messengers Moving, storage, including warehousing, and freight services Photo studios including photographic and portrait photography services Pet services except veterinary services including testing laboratories Data processing, hosting, and related services Facilities support services Business support services Investigation and security services including locksmiths Services to building and dwellings including domestic services, extermination and pest controls services, landscaping services and other support services from commercial providers Employment agency services Personal care services including hairdressing salons and personal grooming establishments, diet and weight reducing centers and other personal services Laundry and dry cleaning services Recreation and Entertainment to be Subjected to Sales and Use Tax Membership clubs and participant sports centers including bowling centers but excluding aircraft rental and leasing without pilots and marinas and boat storage Amusement parks, campgrounds, and related recreational services including fitness and recreational sports centers but excluding sales by elementary and secondary schools, tuitions and fees paid to fine arts schools and promoters of performing arts, sports and similar events Motion picture theaters including those of post secondary educational institutions Live entertainment excluding sports and promoters of performing arts, sports and similar events and independent artists, writers, and performers Spectator sports except elementary and secondary schools and promoters of performing arts, sports and similar events Museums, historical sites, zoos, parks, art galleries and libraries

12

The Governor’s Revenue Program Maintenance and Repair, Labor Separately Stated to be Subject to the Sales and Use Tax Motor vehicle including car washes Audio-visual, photographic and information processing equipment Electronic and precision equipment Commercial and industrial equipment except for manufacturers Recreational and sports equipment except for boats Furniture, furnishings, and floor coverings Household appliances Clothing and footwear repair, rental and alterations Watch, clock and jewelry repair Other Items Subject to the Sales and Use Tax Professional association dues except for alumni associations, parent-teacher organizations, booster clubs, scouting organizations, veterans membership organizations, political organizations, athletic associations, regulatory or administrative associations, property owners’ associations, condominium and homeowners’ associations, tenant associations, and cooperative owners’ associations

The sales tax base modernization taxed at 6.0 percent is projected to yield $197,594,235 in FY 2012, including the sales tax on medical marijuana and the disallowance of insurance proceeds as the trade-in allowance on private passenger automobiles.

The expansion of the sales tax base to include certain items that are currently exempt from the sales and use tax will provide the State with a more stable sales tax base upon which to levy a tax. The sales tax rate proposed for these items is 1.0 percent fulfilling the Governor’s campaign pledge to tax at least some exempt items at a 1.0 percent rate. It is important to note that the currently exempt items that will be subject to the 1.0 percent sales tax rate do not include food and food ingredients, prescription drugs, durable medical equipment or gasoline. The list of the currently exempt items subject to the 1.0 percent sales tax is as follows:

Items Currently Exempt from the Sales and Use Tax Agricultural products for human consumption Air and water pollution control facilities Aircraft, including aircraft rental and leasing without pilots, and aircraft parts Banks and Regulated Investment Companies interstate toll-free calls Boats or vessels brought in exclusively for winter storage, maintenance, repair or sale Boats or vessels generally Boats to nonresidents Building materials used to rebuild after a disaster Casual sales Clothing and footwear Coffins, caskets and burial garments

The Currently Exempt Items That Will Be Subject to the 1.0 Percent Sales Tax Does NOT Include Food, Prescription Drugs or Gasoline

13

The Governor’s Revenue Program Items Currently Exempt from the Sales and Use Tax (Continued) Coins Commercial fishing vessels in excess of five net tons Commercial vessels of more than 50 tons burden Compressed air Containers Dietary supplements Educational institutions rental charges Electricity, steam and thermal energy from the Rhode Island Economic Development Corp. Equipment for research and development Farm equipment Farm structure construction materials Flags Heating fuels used in the heating of homes and residential premises Horse food products Jewelry display product Manufacturers’ machinery and equipment Precious metal bullion Promotional and product literature of boat manufacturers Purchases used for manufacturing purposes Renewable energy products Rhode Island Economic Development Corporation project status designees Rhode Island Industrial Facilities Corporation Lessees Sales by writers, composers and artists Sales in municipal economic development zones Sales to charitable, educational or religious organizations Sales of trailers ordinarily used for residential purposes Supplies used in on-site hazardous waste recycling, reuse or treatment Textbooks Total loss or destruction of a motor vehicle within 120 days of tax payment Trade-in value of boats and private passenger automobiles Transfers or sales made to immediate family members Transfers or sales related to a business dissolution or partial liquidation Water for residential use

As a result of the sales tax base expansion to exempt items and the taxing of these items at a rate of 1.0 percent, the State will be put in noncompliance with the Streamlined Sales and Use Tax Agreement (SSUTA). Under the SSUTA, signatory vendors collect on behalf of the State sales and use taxes due on purchases made by state residents and remit the taxes collected to the State. Once Rhode Island is no longer in compliance with the SSUTA, signatory vendors would no longer be obligated to continue the collection and remittance of these taxes to the State. The Governor’s proposed 1.0 percent tax on certain currently exempt items is set to sunset when federal legislation is passed requiring remote sellers to collect and remit to the State taxes on transactions between remote sellers and the state’s residents. This

14

The Governor’s Revenue Program sunset provision would put Rhode Island back in compliance with the SSUTA contemporaneously with the State being granted the power to collect these taxes. The Department of Revenue estimates that the imposition of a 1.0 percent sales tax on the above listed exempt items will generate $86,840,462 in sales tax revenue in FY 2012. The revenue lost from the State falling into noncompliance with the Streamlined Sales and Use Tax Agreement is estimated at $1,840,011. Thus, the net revenue impact from the expansion of the sales tax base to certain currently exempt items taxed at a 1.0 percent rate is $85,000,451. Currently, the state and local meals and beverage tax rate is 8.0 percent, comprised of the state’s 7.0 percent sales tax rate and the 1.0 percent local meals and beverage tax rate. Under the Governor’s sales tax modernization proposal, the state sales tax rate is being reduced to 6.0 percent. Rather than have the state and local meals and beverage tax rate decline to 7.0 percent with the decrease in the sales tax rate, Governor Chafee proposes to maintain the state and local meals and beverage tax rate at 8.0 percent and to designate the 1.0 percent that previously went to the state to finance the newly created Municipal Accountability, Stability and Transparency (MAST) Fund. The MAST Fund is intended to provide an incentive to cities and towns to employ fiscally prudent budgeting practices and address unfunded liabilities for pensions and Other Post Employment Benefits (OPEB). Cities and towns will receive additional state aid starting in FY 2012 and thereafter if they comply with certain requirements as set forth in statute. The Department of Revenue estimates that the maintenance of the state and local meals and beverage tax rate at 8.0 percent will generate $19,330,231 for the MAST Fund in FY 2012.

The Governor’s Meals and Beverage Tax

Proposal Will Provide Financing for the Newly

Created MAST Fund

In a similar vein, the Governor proposes the creation of the Tourism Asset Protection (TAP) Fund to be financed by retaining the tax rate on the rental of rooms and lodging at 8.0 percent. Under current law, the state and local tax on the rental of rooms and lodging is comprised of the state sales tax rate of 7.0 percent and the local hotel tax rate of 1.0 percent. Under the Governor’s sales tax modernization proposal, the state sales tax rate is being reduced to 6.0 percent. Rather than have the state and local tax on the rental of rooms and lodging decline

to 7.0 percent with the decrease in the sales tax rate, Governor Chafee proposes to maintain the state and local tax rate on the rental of rooms and lodging at 8.0 percent and to designate the 1.0 percent that previously went to the state to finance the newly created TAP Fund. The TAP Fund is designed to provide monies for the construction, improvement, and/or preservation of state assets directly related to the tourism industry. The Department of Revenue projects that the retention of the state and local tax of 8.0 percent on the rental of rooms and lodging will provide $2,620,180 to the TAP fund in FY 2012.

The Retention of an 8.0 Percent Tax on the

Rental of Rooms and Lodging Will Finance the Newly Created TAP Fund

Taken as a whole, the net revenue impact of the Governor’s Sales Tax Modernization Proposal is a revenue increase of $164,880,400 in FY 2012. The FY 2013 through FY 2016 revenue impact of the Governor’s Sales Tax Modernization Proposal by each component and in combination is shown in the table below:

15


General Revenue Proposal FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Sales Tax Rate to 6.0% $ (117,714,286) $ (120,734,637) $ (121,584,056) $ (122,431,472) $ (123,280,080)

Base Mod at 6.0% 195,908,719 200,935,408 202,349,074 203,759,406 205,171,721

Exempt Items at 1.0% 86,840,462 89,102,305 89,744,226 90,386,148 91,028,069

Lost Revenue from SSUTA (1,840,011) (1,863,398) (1,878,916) (1,873,824) (1,876,279)

Med Marijuana at 6.0% 802,659 1,333,365 1,342,971 1,352,577 1,362,183

No Ins Proceeds as Trade-In 882,857 905,852 912,378 918,904 925,430

General Revenues Total $ 164,880,400 $169,678,895 $ 170,885,678 $ 172,111,739 $ 173,331,044

Non-General Rev Proposal FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

MAST Fund $ 19,330,231 $ 19,833,706 $ 19,976,594 $ 20,119,482 $ 20,262,370

TAP Fund 2,620,180 2,688,425 2,707,793 2,727,162 2,746,530

Non-General Rev Total $ 21,950,411 $ 22,522,131 $ 22,684,387 $ 22,846,644 $23,008,900

In addition to the Business Tax Competitiveness and the Sales Tax Modernization Proposals, the Governor’s FY 2012 Budget includes a variety of other tax and fee proposals. These items are detailed in the General Revenues section of the Executive Summary.

16

The Economy

Introduction The Consensus Revenue Estimating Conference (REC) convenes at least twice each year, typically within the first ten days of May and November. Historically, the purpose of the conference was confined to forecasting current and budget year revenue estimates. During the 1998 legislative session, the Revenue Estimating Conference statutes were modified to also require the adoption of a consensus economic forecast. Prior to the November 2001 conference, the conferees adopted a forecast for Rhode Island total employment, Rhode Island personal income, and the U.S. consumer price index for all urban consumers (CPI-U) covering the state’s prior fiscal year, its current fiscal year, and the budget year. Beginning with the November 2001 conference, in addition to Rhode Island total employment, Rhode Island personal income and the U.S. CPI-U, forecasts for Rhode Island wage and salary income, Rhode Island dividends, interest and rent, the Rhode Island unemployment rate, the interest rate for ten year U.S. Treasury notes, and the interest rate for three month U.S. Treasury bills are also agreed upon at the Revenue Estimating Conference. Finally, the consensus forecast of these economic variables now includes the prior calendar and fiscal years, the current calendar and fiscal years, the budget calendar and fiscal years, and the next five calendar and four fiscal years.

Economic Forecast This section describes the economic forecast used as an input for the Revenue Estimating Conference’s consensus revenue estimates. During its November 2010 meeting, a forecast of the U.S. and Rhode Island economies was presented by Moody’s Economy.com. The Rhode Island Department of Labor and Training (DLT) also presented current employment and labor force trends in Rhode Island. The conferees heard the testimony of Andres Carbacho-Burgos, an economist with Moody’s Economy.com, and Robert J. Langlais, Assistant Director for DLT’s Labor Market Information unit. The Revenue Estimating Conference adopted the economic forecast shown below on November 5, 2010 through a consensus process informed by the testimony of Dr. Carbacho-Burgos and Mr. Langlais. The updated economic forecast made significant changes to the consensus outlook adopted at the May 2010 Revenue Estimating Conference. As reported at the November 2010 Revenue Estimating Conference, Rhode Island’s labor market continued to feel the effects of the “Great Recession”. The Rhode Island Department of Labor and Training reported that the unemployment rate decreased to 11.5 percent in September 2010 after peaking at 12.7 percent in December 2009. This was a decrease of 1.2 percentage points recording the lowest unemployment rate since July of 2009 when it was 11.4 percent and the first year over year decrease since before the national recession. There was a year-over-year increase of 3,600 employed Rhode Islanders in September 2010 while the number of unemployed Rhode Islanders declined by 2,500. Rhode Island establishment employment declined over the period resulting in a decrease of 5,200 jobs from September 2009 to September 2010. The sector breakdown of these job losses were as follows: Retail Trade, -2,100; Accommodation and Food Services, -1,300; Professional and Business Services, -1,200; Manufacturing, -1,200; Wholesale Trade, -900; Arts and Entertainment, -700; Educational Services, -200; and Government, -100. The broad sectors of the Rhode Island economy which added jobs year-over-year in September 2010 were as follows: Health Care and Social Assistance, 1,100; Other Services, 500; Financial Activities, 300; Transportation and Utilities, 200; Information, 200; Natural Resources and Mining, 100; and Construction, 100. In fact, since the January 2007 peak employment of

17

The Economy

496,500 jobs, Rhode Island businesses have shed 47,900 jobs as of September 2010, a decline of 9.6 percent. While there is no official measurement and dating of recessions at the state level, employment is usually used to gauge the cyclical status of the state economy. In FY 2009, total non-farm employment declined by 3.6 percent, followed by a further decline of 3.7 percent in FY 2010. Total non-farm employment is projected to increase by an additional 0.1 percent from 453,200 in FY 2010 to 453,600 in FY 2011. The principals anticipate an increase of 7,400 jobs in non-farm employment for FY 2012 and an increase of 14,700 jobs in FY 2013. Over the FY 2014 through FY 2016 period, Rhode Island’s economy is expected to add 36,500 jobs. It should be noted that while adopted growth rates indicate a positive trend from FY 2011 through FY 2014, the adopted number for total non-farm employment during these years is below those adopted for the same period at the May 2010 Conference. It is not until FY 2015 that the estimate for total non-farm employment adopted at the November 2010 Conference excees the estimate adopted at the May 2010 Conference. The unemployment rate for FY 2011 is projected to decline slightly from 12.3 percent in FY 2010 to 11.8 percent. As recovery takes hold, Rhode Island’s unemployment rate is expected to decline rapidly from 11.3 percent in FY 2012 to 5.9 percent in FY 2016. Even at this lower rate, Rhode Island’s unemployment rate will be 0.9 percentage points higher than the unemployment rate achieved when the economy peaked in FY 2007. Personal income is expected to improve to a 2.0 percent rate of growth in FY 2011 up from 0.5 percent growth in FY 2010. The November 2010 Conference estimates for personal income growth suggest a positive upward trend from FY 2011 through FY 2016. It should be noted that the adopted estimates for personal income growth are below, except for FY 2013, the adopted estimates for the same period during the May 2010 Conference. For FY 2012, the projected growth rate for personal income is 3.2 percent, down from 3.7 percent that was adopted in May. For FY 2013 it is 5.0 percent, up from 4.9 percent that was adopted in May. The personal income growth rate is expected to decrease to 4.4 percent in FY 2014 and remain at or above 3.7 percent throughout the remainder of the forecast period. This projection is consistent with the forecast adopted in May 2010. Similarly, estimates of dividend, interest and rents are expected to increase slightly in FY 2011 before bouncing back considerably in FY 2012 through FY 2016. Wage and salary income growth is estimated to increase in FY 2011 relative to the estimate growth adopted in May 2010 but then decrease relatively in FY 2012 before increasing from FY 2013 to FY 2016 again relative to the estimates adopted in May 2010. Wage and salary income growth is expected to improve beginning in FY 2012 with projected growth of 2.4, percent an increase of 0.8 percentage points from FY 2011. The rate of growth accelerates in FY 2013 to 5.4 percent and remains steady in FY 2014 at 5.3 percent before decelerating in FY 2015 and FY 2016 to 4.2 percent and 3.4 percent respectively. The U.S. rate of inflation as measured by CPI-U is anticipated to increase to 1.2 percent in FY 2011 from 1.0 percent in FY 2010. The increase is mainly due to the increase in gasoline, fuel oil and natural gas prices combined with the expectation of quantitative easing from the Federal Reserve. The CPI-U is forecasted to increase further in FY 2012 to a 2.0 percent before rising to 2.8 percent in FY 2013. In FY 2014 through FY 2016, inflation is expected to decelerate and settle at 2.2 percent in FY 2016. From FY 2011 through FY 2012, the interest rate on three month Treasury bills is expected to remain low with rates of 0.3 and 0.7 percent respectively. In FY 2013, the interest rate on three month Treasury bills rises to 2.4 percent then rises again to approximately 3.8 percent in FY 2014 before stabilizing at this rate

18

The Economy

through FY 2016. The interest rate on ten year Treasury notes is expected to fall from 3.5 percent in FY 2010 to 2.9 percent in FY 2011 but rise substantially to 4.4 percent in FY 2012. The interest rate on ten year Treasury notes is anticipated to peak at 5.2 percent in FY 2013 and then steadily decline to 4.5 percent in FY 2016. Consistent with the perspective discussed here, the consensus economic forecast reflects the early stages of recovery from the nation’s economic crisis in employment, income, and other coincidental economic indicators in the next six years. In particular, employment growth is expected to be positive in FY 2011 through FY 2016 for the first time since FY 2007. More rigorous employment growth is expected in FY 2014 before the rate of growth declines to more sustainable levels in FY 2015 and beyond. Personal income growth is expected to reach its peak in FY 2013 and follow a similar pattern to employment growth over the remaining forecast period. The Consensus economic forecast for the fiscal years 2011 through 2016 agreed upon by the conferees at the November 2010 Revenue Estimating Conference is shown in the following table.

The November 2010 Consensus Economic Forecast Rates of Growth FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Total Employment 0.1 1.7 3.2 3.3 2.5 1.7 Personal Income 2.0 3.2 5.0 4.4 3.9 3.7 Wage and Salary Income 1.6 2.4 5.4 5.3 4.2 3.4 Dividends, Interest and Rent 0.1 3.2 6.8 7.2 6.3 5.5 Nominal Rates U.S. CPI-U 1.2 2.0 2.8 2.7 2.3 2.2 Unemployment Rate 11.8 11.3 9.2 7.4 6.4 5.9 Ten Year Treasury Notes 2.9 4.4 5.2 4.8 4.5 4.5 Three Month Treasury Bills 0.3 0.7 2.4 3.8 3.9 3.7

19

General Revenues

Introduction

The Governor’s recommended budget is based on estimated general revenues of $3.040 billion in FY 2011 and $3.246 billion in FY 2012. Annual estimated growth during FY 2011 and FY 2012 is 0.8 percent and 6.8 percent, respectively. Estimated deposits of $79.5 million and $91.3 million will be made to the Budget Reserve and Cash Stabilization Fund during these fiscal years. The contributions to the Budget Reserve and Cash Stabilization Fund are funded by limiting annual appropriations to 97.4 percent of estimated revenues in FY 2011 and 97.2 percent of estimated revenues in FY 2012. The revenue estimates contained in the Governor’s FY 2011 supplemental and FY 2012 recommended budgets are predicated upon the revenue estimates adopted at the November 2010 Consensus Revenue Estimating Conference (REC) and the Governor’s recommended changes to the adopted general revenues. The Consensus Revenue Estimating Conference is required by statute to convene at least twice annually to forecast general revenues for the current year and the budget year, based upon current law and collection trends, and the consensus economic forecast. The Conference members are the State Budget Officer, the House Fiscal Advisor, and the Senate Fiscal Advisor. Typically, the two required meetings of the Consensus Revenue Estimating Conference occur in November and May of each fiscal year.

FY 2011 Revised Revenues

The principals of the November 2010 Revenue Estimating Conference adopted revenue estimates that were $17.5 million greater than the enacted FY 2011 revenue estimates, an increase of 0.7 percent. As shown in the General Revenue Changes to Adopted Estimates table in Appendix A of this document, the Governor’s revised FY 2011 Budget recommends an increase of $2.4 million in revenues. This $2.4 million in recommended changes to the FY 2011 adopted estimates breaks down as follows:

• An increase of $97,880 is attributable to the revenue generated by the agreement with the Council of State and Territorial Epidemiologists (CSTE) to develop and participate in an influenza hospitalization surveillance project.

• An increase of $2.3 million is attributable to the transferring of excess bond proceeds from the State Police headquarters project to general revenues.

FY 2011 Revised Revenues vs. FY 2010 Final Revenues

Recommended revenues for FY 2011 are based upon a $22.7 million increase in total general revenues over final FY 2010, or growth of 0.8 percent. Much of this increase can be found in personal income taxes, motor vehicle operator’s licenses and registration fees, the lottery transfer, insurance companies gross premiums taxes, sales and use taxes, and public utilities gross earnings taxes. These increases are partially offset by estimated decreases in business corporations taxes, cigarette taxes, and financial institutions taxes. Personal income tax collections continue to be the single largest source of state general revenues at 30.8 percent for FY 2011. Personal income tax collections are estimated to expand at an annual rate of 4.3 percent or $38.4 million for FY 2011. Much of this increase is due to increased estimated income tax payments of $22.6 million, followed by an increase in withholding payments of $19.9 million. The overall increase, however, is slightly offset by an estimated increase of $4.2 million in refund payments. Final income tax payments are expected to remain flat vis-à-vis final FY 2010 collections. General business tax collections are projected to drop by $21.8 million or -5.7 percent, due primarily to an estimated decrease in business corporations taxes of $23.5 million and in financial institutions taxes of

20

General Revenues $2.1 million. The estimated decline in business corporations taxes is due to the testimony of the Division of Taxation at the November 2010 Revenue Estimating Conference which revealed the occurrence of large, one time payments that will not be repeated in FY 2011. These revenue decreases are partially offset by anticipated increases in insurance companies gross premiums taxes of $2.3 million and public utilities gross earnings taxes of $1.2 million. Sales and use tax collections are projected to increase by $2.1 million or 0.3 percent, over final FY 2010 collections. Sales and use taxes represent 26.5 percent of total general revenues in FY 2011. For FY 2011 sales and use tax collections are projected to be $805.5 million. Excise taxes other than the sales and use tax are expected to increase by $1.1 million or 0.5 percent in FY 2011 over final FY 2010 collections due primarily to a projected increase in motor vehicle operator’s licenses and registration fees of $3.5 million. The Department of Revenue, Division of Motor Vehicles has implemented a new collection method beginning in late FY 2010 and as such has seen more timely deposits of receipts. Cigarette tax payments are projected to decrease by $3.3 million in FY 2011 versus final FY 2010 collections. Alcohol excise taxes and motor carrier fuel use tax collections are estimated to increase by $730,523 and $131,130 respectively in FY 2011. Other taxes are projected to decrease by $1.6 million, or 4.2 percent in FY 2011 relative to final FY 2010 receipts. Of the total decrease in other taxes, inheritance and gift taxes are expected to decrease by $756,952, realty transfer taxes are anticipated to decline by $593,915, and racing and athletics tax collections are projected to decline by $242,221. The expected decrease in inheritance and gift tax collections is due to the fact that the General Assembly increased the estate tax exemption amount from $675,000 to $850,000 effective January 1, 2010. Typically estate taxes are not due until nine months after a decedent’s death. Racing and athletic taxes’ downward trend is expected to accelerate as Twin River has eliminated live greyhound racing on the premises and now solely relies on simulcast racing for pari-mutuel wagering. Racing and athletics taxes are expected to total $1.25 million in FY 2011 a decrease of 16.2 percent from final FY 2010 collections. Realty transfer taxes are expected to total $6.4 million in FY 2011, a decrease of 8.5 percent from final FY 2010 collections. In the Governor’s FY 2011 Budget, departmental receipts are projected at $334.8 million, an increase of $1.7 million from final FY 2010 collections, or 0.5 percent. It should be noted that the increase in the departmental receipts incorporates the Governor’s proposed revenue enhancement of $97,880 from the CSTE Influenza Hospitalization Surveillance Project. In addition to the above general revenue components, an increase is expected in FY 2011 for the lottery transfer to the general fund of $2.8 million, or 0.8 percent from final FY 2010. The increased lottery transfer in FY 2011 is due to the results of the November 2010 REC which increased the estimated transfer amount from the video lottery terminals installed at Twin River and Newport Grand by $4.4 million and decreased instant tickets and on-line games by $1.6 million. The gas tax transfer to the general fund no longer occurs and the unclaimed property transfer to the general fund is forecasted to decline by $567,150 in FY 2011 or 9.7 percent. The decrease in the unclaimed property transfer is attributable to the testimony provided by the Office of the General Treasurer at the November 2010 REC. For FY 2011, other miscellaneous general revenues are projected to increase by $656,768. The increase in other miscellaneous general revenues incorporates the Governor’s proposal to transfer the excess bond proceeds of $2.3 million from the State Police headquarters project to general revenues.

21

General Revenues

FY 2012 Proposed Revenues

The Governor’s recommended FY 2012 Budget estimates general revenues of $3.246 billion, an increase of 6.8 percent from the revised FY 2011 level. The Governor’s recommendation is comprised of $2.938 billion of revenue estimated at the November 2010 Revenue Estimating Conference and $307.8 million of changes to the adopted estimates. These changes are shown in the schedule General Revenue Changes to Adopted Estimates located in Appendix A of this document. The largest source of FY 2012 general revenues is the personal income tax, with estimated receipts of $950.0 million, $2.2 million more than the November 2010 REC adopted estimate for FY 2012 or growth of 1.4 percent from the revised FY 2011 amount. This revenue increase is the net result of the Governor’s proposal to eliminate an existing tax credit, institute a new top 100 delinquent taxpayers list, and offset lottery winnings for taxes owed to the State Tax Administrator. The Governor proposes the elimination of the Rhode Island Motion Picture Production Company Tax Credit effective July 1, 2011 which is estimated to increase personal income tax collections by $1.3 million in FY 2012. The Governor further proposes for the Department of Revenue’s Division of Taxation to publish two top 100 delinquent taxpayer lists; one for individual and one for business taxes. Currently the Division of Taxation publishes a single list of the top 100 tax delinquents that includes both individual and business taxpayers. By publishing a list of 100 individual delinquent taxpayers the number of delinquent taxpayers contacted will increase thereby increasing the amount of collections from delinquent taxpayers. The proposal is estimated to increase personal income tax receipts in FY 2012 by $779,965. Finally, the Governor proposes to require that lottery winnings in excess of $600.00 be offset against debts owed to the State Tax Administrator. The payment of taxes owed from lottery winnings in excess of $600.00 would be the third priority after child support debts and benefit overpayments by the Department of Labor and Training. This proposal is estimated to increase personal income tax collections by $141,457. General Business taxes are projected to represent 11.5 percent of total general revenue collections in the FY 2012 Budget. Business corporations tax revenues are expected to yield $130.4 million, a decrease of $635,462 from the FY 2012 estimate adopted at the November 2010 REC. This decrease is the result of the Governor’s Business Tax Competitiveness Proposal (BTCP). This proposal reduces the corporate income tax rate from 9.0 percent to 7.5 percent over a three year period beginning on January 1, 2012. In addition, the BTCP restructures the corporate minimum and minimum franchise taxes from a flat rate to graduated rates based on Rhode Island gross receipts. These proposals are expected to reduce business corporations tax collections by $8.5 million, and $6.1 million respectively in FY 2012. These revenue reductions are offset by the implementation of combined reporting and the phasing out of the Jobs Development Act over a three year period beginning in 2012, increasing revenues by $8.9 million and $4.8 million respectively. The total Business Tax Competitiveness Proposal reduces business corporation taxes by $905,533 in FY 2012. These revenue reductions are offset by increased business corporations tax collections that result from the repeal of the Motion Picture Production Company Tax Credit effective July 1, 2011, an increase of $139,656, and the publishing of a top 100 delinquent business taxpayers list through the Department of Revenue’s, Division of Taxation, an estimated increase of $130,415. The estimated growth rate in business corporations taxes over the FY 2011 revised level is 5.7 percent. Insurance companies gross premiums taxes are projected to reach $100.9 million in FY 2012. This amount is equal to the revenue estimate for insurance companies gross premiums taxes adopted at the November 2010 Revenue Estimating Conference plus an increase in revenue of $204,966 from the repeal of the Motion Picture Production Company Tax Credit effective July 1, 2011. The recommended growth rate in FY 2012 insurance companies gross premiums taxes over the FY 2011 revised estimate is 2.8 percent.

22

General Revenues FY 2012 recommended revenues for the public utilities gross earnings tax, the financial institutions tax, and the bank deposits tax are at the same levels as were adopted at the November 2010 REC. The respective FY 2012 recommended growth rates for these taxes relative to the FY 2011 revised estimates are 2.1 percent, 100.0 percent, and 2.6 percent respectively. The health care provider assessment on nursing homes is forecasted to yield $41.4 million, a decrease of $428,112 from the estimate that was adopted at the November 2010 REC. This decrease can be attributed to the estimated decline in revenues of $704,000 from the Governor’s proposal for nursing home provider rate reform. The decrease is partially offset by increased health care provider assessment tax receipts of $275,888 due to the establishment of a top 100 delinquent business taxpayers list by the Division of Taxation. Sales and use tax collections are expected to yield $989.5 million in FY 2012, $165.5 million more than was adopted at the November 2010 Revenue Estimating Conference for FY 2012. The Governor’s Sales Tax Modernization Proposal includes a reduction in the sales tax rate from 7.0 percent to 6.0 percent which will reduce sales tax collections by $117.7 million; the modernization of the sales tax base to cover some services and items currently exempt from the sales tax, both of which will be taxed at 6.0 percent and are projected to increase sales tax collections by $195.9 million; the taxation of the retail sale of medical marijuana at 6.0 percent, which is estimated to increase sales tax collections by $802,659; the expansion of the sales tax base by taxing certain currently exempt items at a 1.0 percent rate, which is anticipated to increase sales tax collections by $86.8 million; and the disallowance of the use of insurance proceeds from a totaled or stolen motor vehicle as the trade-in allowance for a passenger car which is forecasted to increase sales tax collections by $882,659. As a result of the sales tax base expansion, the state will lose revenues of $1.8 million from becoming non-compliant with the Streamlined Sales and Use Tax agreement. The Governor’s proposal to publish a top 100 delinquent business taxpayer list is expected to increase sales and use tax collections by $602,399. Sales and use taxes are anticipated to contribute 30.5 percent to total general revenues in FY 2012. Motor vehicle operator license and vehicle registration fees are forecasted to equal $42.1 million in FY 2012, a decrease of $9.8 million from what was adopted at the November 2010 REC. This decrease is due to the phase-in of the transfer of the first 20.0 percent of motor vehicle license, registration and title fees to the Intermodal Surface Transportation Fund (ISTF) for use by the Department of Transportation (DOT). Motor carrier fuel use taxes are estimated to reach $1.1 million in FY 2012 and cigarettes tax revenues are expected to total $131.8 million. Each of these recommended revenue amounts are the same as the estimates adopted at the November 2010 Revenue Estimating Conference. Alcohol tax revenues are projected to increase by $200,000 or 1.7 percent in FY 2012 from the revised FY 2011 estimate. Inheritance and gift taxes are projected to equal $28.9 million, the same amount adopted at the November 2010 REC. Realty transfer taxes are estimated at the same level adopted at the November 2010 Revenue Estimating Conference with anticipated collections of $6.5 million, an increase of $100,000 from the revised FY 2011 estimate. Racing and athletics taxes are also estimated at the level adopted at the November 2010 REC. The adopted estimate of $1.1 million for FY 2012 represents a decline of $150,000, or -12.0 percent, from the revised FY 2011 estimate. Other taxes are expected to comprise 1.1 percent of total general revenues in FY 2012. FY 2012 departmental receipts are expected to generate $9.8 million more than the revised FY 2011 estimate. Inclusive of the Governor’s proposed changes to departmental receipts, total departmental revenues are expected to be $344.6 million in FY 2012, or 10.6 percent of total general revenues. In the licenses and fees category, $146.3 million more is expected due primarily to the Governor’s proposal to reinstate the Hospital Licensing fee for one year using the rate of assessment of 5.465 percent and the

23

General Revenues current base of FY 2009 net patient revenues. The FY 2012 recommended departmental revenues figure includes the following proposals:

• An increase of $141.8 million from reinstituting the hospital licensing fee;

• An increase of $3.0 million from mandating insurance companies to obtain official Division of Motor Vehicles driving record abstracts at least every three years for insurance ratings;

• An increase of $18,720 from implementing a charge for checks returned to the Division of Motor Vehicles due to non-sufficient funds;

• An increase of $1.9 million from increasing the daily and annual pass fees for residents and non-residents on both weekdays and weekends to park at state beaches;

• An increase of $1.2 million from increasing the license fee for securities sales representatives to $75 annually;

• An increase of $41,000 from increasing the license fee for a federally covered advisor to $300 annually;

• An increase of $108,915 from increasing the estate tax filing fee to $50;

• An increase of $122,925 from increasing the letter of good standing fee to $50;

• An increase of $556,092 by levying a surcharge of 4.0 percent on the net revenues of compassion centers;

• An increase of $40,000 from increasing the assessment for fire code violations to $125;

• An increase of $110,000 from instituting a fee of $10 for the Department of Children, Youth, and Families’ conducting of applicant background clearances;

• An increase of $786,248 from increasing the Veteran’s Home board and support fee to 100.0 percent of resident countable income;

• An increase of $153,576 in probation and parole monies owed from the offset of personal income tax refunds by the Division of Taxation;

• An increase of $74,160 from the indirect cost recovery assessment on the Telecommunication Education Access Fund’s restructured fees;

• A decrease of $74,902 from the phase-in of the transfer of the first 20.0 percent of commercial driver’s license fees to the ISTF for use by the DOT;

• A decrease of $166,489 from the phase-in of the transfer of the first 20.0 percent of operator control registration reinstatement fees to the ISTF for use by the DOT;

• A decrease of $677,486 from the phase-in of the transfer of the first 20.0 percent of drivers license reinstatement and assessment fees to the ISTF for use by the DOT;

• A decrease of $1.3 million from the phase-in of the transfer of the first 20.0 percent of motor vehicle title fees to the ISTF for use by the DOT;

• A decrease of $371,320 from the dissolution of the Health Services Council within the Department of Health;

The FY 2012 recommended revenues for the other sources component totals $364.0 million, a decrease of $1.9 million, or 0.5 percent, compared to the revised revenue estimate for FY 2011. The largest component of this decline is the decrease in other miscellaneous revenues of $5.8 million. Other

24

General Revenues miscellaneous revenues are anticipated to generate $7.3 million in FY 2012 an increase of $3.5 million from the level adopted at the November 2010 Revenue Estimating Conference. This increase can be attributed to the Governor’s proposal to transfer $3.5 million in excess reserves from the Rhode Island Resource Recovery Corporation. Within the gas tax transfer component, the Governor’s FY 2012 Budget shows no change from the FY 2011 revised estimate. Effective July 1, 2009, the state’s general fund no longer receives any of the revenues generated by the state’s $0.32 per gallon gas tax. Within the lottery category, the recommended FY 2012 budget is $4.0 million greater than the revised FY 2011 Budget, an increase of 1.2 percent. The Governor recommends no changes from the November 2010 REC estimate for the lottery transfer. In FY 2012, the lottery transfer is expected to be $351.5 million and comprise 10.8 percent of total general revenues. The final category of general revenue receipts is the unclaimed property transfer. In FY 2012, this transfer is expected to decrease by $100,000, or 1.9 percent, from the revised FY 2011 estimate. The unclaimed property transfer is projected to be $5.2 million in FY 2012, and comprises 0.2 percent of all general revenues. The chart below shows the sources of general revenues for the period FY 2009 – FY 2012. The values of the two major sources of general revenues, personal income taxes and sales and use taxes, are highlighted.

General Revenue Sources ($ millions)

940.51002.2

898.1950.0936.5

998.51005.4

1176.7

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

1400.0

FY 2009 FY 2010 FY 2011 FY 2012

Personal Income Tax General Business Taxes Sales and Use TaxesOther Miscellaneous Revenues Lottery Receipts Other TaxesDepartmental Receipts Other Sources

25

Restricted Receipts and Other Sources of Revenue

Introduction

The Governor’s recommended budget proposes changes to revenue sources other than general revenues for FY 2011 and FY 2012. The revenue estimates in the Governor’s FY 2011 supplemental budget contains no additional money allocated to restricted receipts. The FY 2012 recommended budget contains an additional $29.7 million in restricted receipts.

FY 2011 Revised Non-General Revenues

For FY 2011, the Governor’s Budget proposes no additional money to be allocated as restricted receipts. The FY 2011 supplemental budget proposes restricted receipt amounts as originally enacted.

FY 2012 Recommended Non-General Revenues The Governor’s FY 2012 Budget proposes enhancing the Intermodal Surface Transportation Fund (ISTF) by phasing in the transfer of various Division of Motor Vehicle general revenue fees over a five year period. The Governor proposes the following transfer schedule: 20.0 percent of the total fees in FY 2012, 40.0 percent of the total fees in FY 2013, 60.0 percent of the total fees in FY 2014, 80.0 percent of the total fees in FY 2015 and 100.0 percent of the total fees in FY 2016. The deposit of these transfers into the ISTF will support the Department of Transportation and reduce its need to borrow money to provide for the required state match when leveraging federal highway funds. The net result to the Governor’s FY 2012 Budget is an increase in other sources of revenue by $12.0 million in FY 2012. The various fees consist of $9.8 million in motor vehicle registration and driver license fees, $74,902 in commercial driver license fees, $166,489 in registration reinstatement fees, $677,486 driver license reinstatement fees, and $1.3 million in motor vehicle title fees. In FY 2012, the Governor recommends maintaining the meals and beverage tax at the 8.0 percent rate. The meals and beverage tax is currently comprised of the sales tax rate of 7.0 percent and the local 1.0 percent tax on meals and beverages. The difference between the current 7.0 percent rate and the 6.0 percent sales tax rate included in the Governor’s Sales Tax Modernization Proposal will be deposited into the newly created Municipal Accountability, Stability and Transparency (MAST) Fund. The MAST Fund is a restricted receipt account that is dedicated to improving the financial integrity of the cities and towns. It is estimated that $19.3 million will be deposited into the MAST Fund in FY 2012. The Governor also recommends maintaining the tax on the rental of rooms and lodging at the 8.0 percent rate. The tax on the rental of rooms and lodging is currently comprised of the sales tax rate of 7.0 percent and the local 1.0 percent hotel tax. The difference between the current 7.0 percent sales tax rate and the 6.0 percent sales tax rate included in the Governor’s Sales Tax Modernization Proposal will be deposited into the newly created Tourism Asset Protection (TAP) Fund. The TAP Fund is a restricted receipt account that is dedicated to the construction and improvement of state owned tourism assets. It is estimated that $2.6 million will be deposited into the TAP Fund in FY 2012. The Governor’s recommended FY 2012 Budget proposes to expand the Department of Human Services’ Children’s Health Account Enhancements which currently bills the first $6,000 of expenses to insurance companies that provide coverage to children with special health care needs and have some form of comprehensive third party liability. The Governor’s recommendation is to increase the billing limit from $6,000 per child to $7,500 per child. The increase in the billing limit to $7,500 is estimated to generate $4.2 million in FY 2012. These monies will be used to offset the cost of other Medicaid services.

26

Restricted Receipts and Other Sources of Revenue The 2010 General Assembly enacted legislation which changed the funding formula for the William M. Davies School. Prior to FY 2012, the William M. Davies School was funded strictly from state aid. In the Governor’s recommended FY 2012 Budget the William M. Davies School will be jointly funded by the state and local education agencies. As a result of this proposal, local education agencies will be required to pay the educational costs of local students that attend the William M. Davies School. The Budget Office estimates that this proposal will increase non-general revenues by $685,495. For the FY 2012 Budget the Governor also proposes to require local education agencies to pay the education costs of local children residing at the Department of Children, Youth, and Families’ Training School. The Budget Office estimates that this proposal will increase non-general revenues by $2.1 million. The Governor recommends a reduction in the Telecommunication Education Access fee on land line phones from the current monthly surcharge of $0.26 to $0.15 and the application of this reduced fee to wireless phones. These two fee changes are estimated to reduce Telecommunication Education Access receipts from land line phones by $591,480 and increase Telecommunication Education Access receipts from wireless phones by $1.3 million in FY 2012. The net result is an increase in revenue of $667,440 to the Telecommunication Education Access Fund which supports internet access for schools and libraries. The Governor also recommends in the FY 2012 Budget the dissolution of the Department of Health’s Health Services Council. The resulting dissolution will decrease restricted receipt revenue by $125,000 in FY 2012. Finally, the Governor recommends in FY 2012 increasing the Board and Support fees for residents of the state Veterans’ Home from 80.0 percent of a patient’s monthly countable income to 100.0 percent of the same dedicating the $196,562 increase in revenue to a restricted receipt account to support the Veterans’ Home’s operations.

27

Unemployment Insurance

A Proposal to Restore Trust Fund Solvency

HISTORY In 1998, The RI General Assembly, at the request of business, enacted a significant change in the computation of the taxable wage base for the Unemployment Insurance (UI) program. Prior to the change which took effect in 1999, the UI taxable wage base was set at 70%of the average annual wage in UI covered employment. In 1998 that amounted to a taxable wage base of $18,200. Starting in 1999, the new law set the UI taxable wage base based on the level of reserves in the Employment Security Fund ranging from a low of $12,000 if reserves exceeded $225 million to a high of $19,000 if reserves fell to $75 million or less on the prior September 30th. Under the new formula, the UI taxable wage base fell to $14,000 in 1999 and then to $12,000 for CY 2000 through 2003. In 2011, our UI taxable wage base is set at the highest level, $19,000. Under the pre-1999 law, the UI taxable wage base would have been $28,800 in 2011. The problem with this change was that the UI taxable wage base and UI taxes were no longer tied to the rise in employee wages while the benefits paid to unemployed workers remain tied to their wages. So, over time, wages and benefit costs grew with inflation while tax receipts failed to keep up. The reserve targets, which determined the taxable wage base, were set in fixed dollar amounts and the taxable wage base values as a percentage of total wages eroded each year. In November 2008, the Employment Security Fund had a reserve of $230.1 million. RI’s relatively low unemployment rate at the time allowed reserves to continue to grow over the next two years and they peaked at $301.3 million in August 2001. Over the first ten years (1999-2008) after the change in the taxable wage base calculation took effect, it is estimated that employers saw a reduction of over $600 million in the amount of UI taxes that they paid compared to what they would have paid under the pre-1999 UI taxable wage base formula. At the end of February 2011, the RI had borrowed $229.4 million from the federal government to maintain payments to its unemployed workers. Our total borrowing from the federal government for UI benefits is expected to peak at $291.0 million this spring. While the severity of the current recession has played a major role in the rapid depletion of Employment Security fund reserves, it is clear that if the changes made to the UI taxable wage base calculation in 1998 had not occurred, RI’s Trust fund would have weathered the recession and would not have had to borrow from the federal government to maintain UI benefit payments. EMPLOYMENT SECURITY ADVISORY COUNCIL The Employment Security Advisory Council (ESAC) convened in October 2009 to begin addressing the problems facing the Unemployment Insurance program and the insolvency of the Employment Security Trust Fund. They reviewed various adjustments that could be made to the UI tax and benefit provisions to bring the financing of the UI program into balance and to help repay the RI’s outstanding federal loans for its UI program. The set of recommendations outlined in this budget article were forwarded to the Governor’s office in the spring of 2010 without a formal endorsement of the council. The council felt that it did not have sufficient time to thoroughly understand the complexities of the UI system, but thought that the proposals should go forward for consideration by the legislature. Unfortunately, the proposals were received too late in the legislative process to be considered in the 2010 General Assembly session. The proposals in this article

28


reflect the same basic recommendations as those forwarded in the spring of 2010, but have been modified to phase in some of the UI benefit adjustments over several years. The table below provides an estimate of the effect of the proposed revenue and benefit adjustments from CY 2012 through CY 2017.

RI DEPARTMENT OF LABOR AND TRAINING

Proposal to Restore Unemployment Insurance Trust Fund Solvency

Summary of Revenue Increases and Benefit Savings by Year

Revenue Items Projected Increase in Revenue (in millions)2012 2013 2014 2015 2016 2017

1 $4.0 $4.0 $5.9 $7.8 $11.5 $14.2

2 $3.1 $3.1 $3.1 $3.1 $3.1 $3.1

Total Projected Revenue Increase by Year $7.1 $7.1 $9.0 $10.9 $14.6 $17.3

Benefit Adjustments Projected Benefit Savings (in millions)2012 2013 2014 2015 2016 2017

1 $1.3 $3.8 $6.0 $8.6 $11.4 $13.0

2 $2.6 $9.9 $17.9 $24.9 $25.6 $26.3

3 $2.2 $4.1 $3.9 $4.1 $4.2 $4.3

4 $0.0 $2.3 $2.2 $2.2 $2.3 $2.4

5 $1.1 $2.1 $2.0 $2.0 $2.1 $2.1

6 $1.1 $1.9 $2.6 $2.7 $2.7 $2.8

7

Total Estimated Benefit Savings by Year $8.3 $24.0 $34.6 $44.5 $48.3 $50.9

Sum of Revenue & Benefit Adjustments $15.4 $31.1 $43.6 $55.4 $62.9 $68.2

Require indivdiuals disqualified from collecting UI for a Voluntary Quit, Misconduct Discharge or a Refusal of Suitable Work to work 8 weeks & earn wages equal to their Weekly Benefit Amount (WBA) in each week to overcome the disqualification.

Unable to determine potential benefit reduction. It is dependent on number of disqualifications each year that are overcome with wages below the WBA.

Reduce the Maximum Potential Total Benefits from 36% of the Base Period Wages to 33% of the Base Period Wages.

Delay UI Benefit Eligibility by the number of weeks of Severance pay the claimant receives (up to a maximum of 26 weeks).

Reduce the Maximum Dependents' Allowance from 5% of the claimant's Weekly Benefit Amount (WBA) to 3% of the WBA over the next two years.

Taxable Wage Base Change Set equal to 47% of average annual wage in CY 2012 and raise to 50% of average annual wage by 2015.

Freeze the Maximum Weekly Benefit Amount (MWBA) at its July 2011 figure and compute annually thereafter at 57.5% of the State Average Weekly Wage (SAWW).

Lower the Wage Replacement percentage from 60% to 50% of the individuals Average Weekly Wage over the next three years.

Use the Average of the Two Highest Quarter Wages instead of the Highest Quarter Wages to Compute the claimant's Weekly Benefit Amount.

Set the Taxable Wage Base $3,000 higher for the employers at the highest tax rate.

29


The table below is a projection of RI’s Employment Security fund, the level UI taxes and benefits expected to be paid through CY 2020 under our current laws. Absent any action to make changes, it is expected that the Employment Security Fund would remain insolvent until CY 2017. And our ability to grow reserves in ensuing years would be very limited.

RI DEPARTMENT OF LABOR AND TRAININGProjected UI Fund Taxes, Benefits & Federal Loans if No Action Taken

(revised 2-10-11)

Balance of RI Dec. 31Regular 0.3% Federal Additional Regular Federal Dec. 31

Taxable State Interest Interest FUTA* FUTA* State UI Loan ES FundWage UI Taxes Assess. Charge Credit Taxes UI Benefits Balance BalanceBase (In millions) (In millions) (In millions) Reduction (In millions) (In millions) (In millions) (In millions)

2009 $18,000 $184.7 $0.0 $0.0 na $0.0 $387.3 $127.5 ($127.5)2010 $19,000 $210.0 $0.0 $0.0 na $0.0 $289.3 $225.5 ($194.3)2011 $19,000 $216.0 $6.5 $9.0 0.3% $0.0 $249.5 $291.0 ($251.0)2012 $19,000 $219.6 $5.6 $12.4 0.6% $9.0 $215.7 $265.9 ($265.9)2013 $19,000 $220.7 $7.1 $10.9 0.9% $18.0 $206.5 $226.6 ($226.6)2014 $19,000 $221.9 $8.7 $9.3 1.2% $27.0 $197.1 $166.0 ($166.0)2015 $19,000 $223.3 $11.2 $6.8 1.5% $36.0 $202.5 $98.0 ($98.0)2016 $19,000 $224.7 $14.0 $4.0 1.8% $45.0 $208.1 $22.4 ($22.4)2017 $19,000 $226.5 $0.0 $0.0 0.0% $54.0 $213.8 $0.0 $44.32018 $19,000 $228.0 $0.0 $0.0 0.0% $0.0 $219.7 $0.0 $52.62019 $19,000 $229.7 $0.0 $0.0 0.0% $0.0 $224.3 $0.0 $58.02020 $19,000 $231.4 $0.0 $0.0 0.0% $0.0 $229.5 $0.0 $59.9

Totals 2009-2020 $2,636.6 $53.2 $52.3 $189.0 $2,843.3 If the changes proposed in this article are implemented, it is projected that RI would be able to fully repay its federal UI loans in 2015 through a combination of $211.6 million in additional federal and state UI taxes and savings of $111.4 million in benefit adjustments. In addition, these changes would allow the RI Employment Security fund to rebuild reserves in preparation for the next recession.

RI DEPARTMENT OF LABOR AND TRAININGProjected UI Fund Taxes, Benefits & Federal Loans Under Proposed Changes

(revised 2-11-11)

Balance of RI Dec. 31Regular 0.3% Federal Additional Regular Federal Dec. 31

Taxable State Interest Interest FUTA* FUTA* State UI Loan ES FundWage UI Taxes Assessment Charge Credit Taxes UI Benefits Balance BalanceBase (In millions) (In millions) (In millions) Reduction (In millions) (In millions) (In millions) (In millions)

2009 $18,000 $184.7 $0.0 $0.0 na $0.0 $387.3 $127.5 ($127.5)2010 $19,000 $210.0 $0.0 $0.0 na $0.0 $289.3 $225.5 ($194.3)2011 $19,000 $216.0 $6.5 $9.0 0.3% $0.0 $249.5 $291.0 ($251.0)2012 $19,800 $226.7 $5.6 $12.4 0.6% $9.0 $207.5 $250.7 ($250.7)2013 $20,200 $227.8 $7.8 $10.2 0.9% $18.0 $182.5 $179.6 ($179.6)2014 $20,600 $230.9 $10.7 $7.3 1.2% $27.0 $162.4 $73.4 ($73.4)2015 $21,400 $234.2 $15.0 $3.0 0.0% $36.0 $158.0 $0.0 $53.82016 $22,000 $239.3 $0.0 $0.0 0.0% $0.0 $159.8 $0.0 $133.32017 $22,600 $243.8 $0.0 $0.0 0.0% $0.0 $162.9 $0.0 $214.22018 $23,400 $245.5 $0.0 $0.0 0.0% $0.0 $167.4 $0.0 $292.22019 $24,000 $247.4 $0.0 $0.0 0.0% $0.0 $170.9 $0.0 $368.82020 $24,600 $249.4 $0.0 $0.0 0.0% $0.0 $174.9 $0.0 $443.3

Totals 2009-2020 $2,755.8 $45.5 $42.0 $90.0 $2,472.4

30

Transportation Funding

Recognizing the importance of investing in our aging transportation infrastructure, the Governor is recommending that transportation needs to be addressed through a multi-year plan that dedicates increasing amounts of transportation-related revenues to fund the operating and capital costs of the Department of Transportation. Primary funding for Rhode Island transportation and highway construction spending is provided through the Federal Highway Administration (FHWA), under the authority of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). This Act, passed in August 2005, authorizes funds for highway construction, highway safety programs, mass transit operations, and other surface transportation projects for the five-year period 2005 - 2009. Under this program, Rhode Island has received an average of $207.2 million per year through FY 2009. SAFTETEA-LU expired in 2009, but was extended through by Congress for one year in 2010 with Rhode Island receiving $220.9 million in funding. In 2011 financing for the federal highway program has relied on short term continuing resolutions to provide funding. No new program has been introduced to replace the SAFETEA-LU program. The State has chosen over the years to seek approval from the voters through biennial referenda which authorize the issuance of general obligation bonds. This process has resulted in growing debt service expenditures, which consume a growing share of the Department’s stagnant gas tax allocation. This over-reliance on debt to fund transportation improvements has long been recognized as a problem by independent reviewers. In 1996, Governor Almond’s Blue Ribbon Panel to Address Transportation Infrastructure Capital Funding identified the debt service problem stating, “the debt service on transportation bonds is a large and increasing burden on the state budget which reduces the amount of gas tax funds available for other purposes.” Upon predicting that the debt service burden would peak at $57 million per year with $30 million per year issuance, the 1996 Blue Ribbon Panel recommended that “Rhode Island needs to reduce its reliance on general obligation bonds for transportation funding.” Transportation 2020, the State’s long range transportation guide plan, in 2002, highlighted the problem of the increasing debt service eroding the funding available for transportation operations and maintenance. The Rhode Island Public Expenditure Council (RIPEC) cited the Transportation 2020 analysis in recommending that transportation system funding should be reformed with one objective of the reformation to be “diminishing reliance on general obligation bonds for future capital project financing”. With the goal of dedicating transportation revenues for transportation purposes, RIPEC further recommended that motor vehicle registrations and driver’s license fees be transferred to a transportation fund over a five year period at 20% per year Governor Donald Carcieri’s Blue Ribbon Panel on Transportation Funding, which examined the transportation financing structure in 2008, echoed the findings of the prior studies in its condemnation of routine bonding to fund transportation improvements. The Panel’s report states:

“Continued borrowing and sole reliance on the gas tax is not the solution. The practice of issuing general obligation bonds every two years to match federal funds is unsustainable. This has resulted in very high annual debt service which has severely limited the amount of state gas tax available for maintenance. Gas tax revenue has decreased significantly over time, as has its purchasing power.”

While the fundamental problem with the current transportation funding structure has been long identified, no change has been forthcoming. Governor Chafee proposes to resolve the structural funding dilemma facing the Department of Transportation by dedicating current revenues to transportation purposes to enable the Department to fund

31

Transportation Funding

Rhode Island’s required match on a pay-as–you-go basis. The program, to be implemented over a five year period, would reduce debt service costs over time, such that Rhode Island would be positioned similar to other state’s with pay-as-you-go capital programs. The chart below shows the funding progress over the five year period. Revenue Item FY 2012 FY 2013 FY 2014 FY 2015 FY 2016Motor Vehicle Registration and License Fees 49,000,000 49,736,415 50,689,262 51,660,432 52,650,279 Commercial Drivers License Fees* 374,508 378,253 382,036 385,856 389,715 Operator Control Registration Reinstatement Fee* 832,445 840,769 849,177 857,669 866,246 Drivers License Reinstatement & Assessment Fees* 3,387,430 3,421,304 3,455,517 3,490,073 3,524,973 Motor Vehicle Title Fees* 6,516,097 6,581,258 6,647,071 6,713,541 6,780,677 Total Available Revenue 60,110,480$ 60,958,000$ 62,023,063$ 63,107,571$ 64,211,889$

Phase-in of Transfer to DOT at 20.0 Percent per Year 12,022,096$ 24,383,200$ 37,213,838$ 50,486,057$ 64,211,889$

Net General Revenues 48,088,384$ 36,574,800$ 24,809,225$ 12,621,514$ -$ * FY 2012 figure was adopted at the November 2010 REC. Growth is assumed at 1.0 percent rate.Notes: The value of Motor Vehicle Registration and License Fees does not include revenues received from the imposition of the rental vehicle surcharge. The Governor’s proposed plan will provide approximately $64.2 million by FY 2016, which will enable Rhode Island to eliminate the use of general obligation bonds to provide the state match for federal funds. When the State eliminates the reliance on annual bond issues, debt service will decline, freeing up gas tax revenues for other purposes. The revenues to be transferred to the Intermodal Surface Transportation Fund are not new revenues, but are transferred form the General Fund, and therefore result in decreased resources available for other state expenditures.

Referenda YearReferenda

RecommendedFiscal Year

Bonds to Be Issued Per Year Pay Go Match

Total Bonds and Paygo Cash for State

Match

November 2010 80,000,000$ FY 2011 40,000,000$ -$ 40,000,000$ FY 2012 40,000,000 0 40,000,000

November 2012 61,000,000$ FY 2013 39,000,000 1,000,000 40,000,000FY 2014 22,000,000 18,000,000 40,000,000

November 2014 16,000,000$ FY 2015 16,000,000 24,000,000 40,000,000FY 2016 0 40,000,000 40,000,000

Additionally, the Governor recommends that the Department of Transportation seek federal approval for tolling of certain roads in Rhode Island, which will provide additional new revenues to address unmet infrastructure needs. This program is expected to take several years to implement and therefore is not expected to impact the capital program until the end of the five year planning horizon. The proceeds from tolls would be utilized to help address the backlog of transportation infrastructure needs.

32

Municipal Accountability, Stability, and Transparency Fund

Local governments are facing ever-increasing costs for retirement and retiree health care. These two components represent significant cost drivers for municipal budgets. Given this, Governor Chafee is proposing to create the Municipal Accountability, Stability and Transparency (MAST) Fund. The MAST Fund is designed to encourage local governments to focus on the sustainability of current plans and reduce the unfunded liability of significantly underfunded pension plans. In addition, the MAST Fund addresses the significant unfunded liabilities for Post Employment

Benefits Other Than Pensions (OPEB).

Governor Recommends $19.3

Million Incentives to Municipalities for

Prudent Fiscal Practices

Furthermore, Governor Chafee’s proposal includes an incentive to employ fiscally prudent budgeting practices for cities and towns by requiring, for example, cities and towns to provide for a Five-Year Budget Forecast and a fiscal impact statement for changes in health care benefits, pension benefits and OPEB. This information would be submitted to the Division of Municipal Finance. To partially offset the additional funding requirements for local pension plans and OPEB as set forth under MAST, and to provide an incentive for fiscally prudent budgeting practices, Governor Chafee proposes to finance the newly created MAST Fund by maintaining the state and local meals and beverage tax rate at 8.0 percent. The state and local meals and beverage tax rate consists of the state sales tax rate of 7.0 percent and the 1.0 percent local meals and beverage tax rate. The Governor’s Sales Tax Modernization Proposal lowers the state sales tax rate to 6.0 percent. By maintaining the state and local meals and beverage tax rate at 8.0 percent the Governor is able to designate the 1.0 percent that previously went to the state to finance the newly created MAST Fund. It is projected that this fund would total $19.3 million, which would be available for municipal governments. Distribution of the MAST Fund receipts to each community is based on the 2009 General Revenue Sharing percent distribution. In FY 2012, and thereafter, cities and towns will be eligible for MAST Fund aid if they comply with certain fiscally prudent management practices, and meet the minimum requirements towards adequately funding pensions and Post Employment Benefits Other Than Pensions (OPEB). Commencing in FY 2014 cities and towns will be expected to comply with the statutory requirements, or face a loss in state aid as a result of the reduction of the state’s share in the teacher retirement contributions. The MAST Fund is designed in a three-tiered approach, increasing municipal accountability every year. Starting in FY 2012, all cities and towns will receive additional state aid if they comply with the following fiscally prudent practices:

• Provide Five-Year Forecast to the Division of Municipal Finance for major funds as defined by generally accepted accounting principles as established by the Governmental Accounting Standards Board (GASB). The forecast has to include two scenarios: One scenario would show a baseline forecast, the other forecast would include pensions and Post Employment Benefits Other Than Pensions (OPEB) funded at 100 percent of the Annually Required Contribution (ARC), separately for the general and unrestricted school funds. The forecast also has to show underlying actuarial assumptions.

Requirement #1 Prudent Fiscal

Practices in FY 2012

• Provide fiscal impact statements to the Division of Municipal Finance for changes in health care benefits, pension benefits and OPEB, reflecting the impact on the unfunded liability and ARC, as well as the impact on the Five-Year Forecast. Fiscal impact statements have to show underlying actuarial assumptions and support for underlying assumptions.

• Provide financial data, such as quarterly reports, adopted budget surveys and the Comprehensive Annual Financial Report (CAFR) on time.

33

Municipal Accountability, Stability, and Transparency Fund

• Join electronic reporting/implement Municipal Uniform Chart of Accounts (UCOA), within six months of implementation.

Starting in FY 2013, all cities and towns will receive MAST Fund state aid if they comply with the fiscally prudent practices, as spelled out above, and the following requirements to increase funding of pensions: (A) Cities and towns will be given a maximum of 5 years to achieve 100 percent of their Annually Required Contribution (ARC) or their Annual Pension Cost (APC), whichever is higher, for municipal pension plans. Municipalities shall be required to make their ARC in accordance with

generally accepted accounting principles promulgated by the Governmental Accounting Standards Board (GASB). In the first year, the municipality’s actual contribution would increase by the difference between the prior year’s ARC or APC, whichever is greater and its actual contribution divided by five. For years two through five, the annual actual contribution would increase by the difference between the ARC or APC of the most recent valuation of the immediately preceding year and the actual contribution made by the municipality in the prior year divided by the remaining years. (B) Beginning in FY 2013, cities and towns that have not previously met the goal of 100 percent funding of ARC or APC, whichever is greater, cannot decrease the dollar amount of contribution compared to the preceding year. (C) Starting in FY 2013, cities and towns that have any municipal pension plan that has a funded ratio below 50 percent, as determined in the latest valuation, will be required to make an additional contribution equal to 10 percent over and above the actual contribution made in the prior fiscal year, not including the additional funding as defined in (A). This additional contribution would continue until the municipality’s funding ratio is 50 percent or higher.

Requirement #2 Funding Progress for Municipal Pensions in

FY 2013 and OPEB Liabilities in FY 2014

Starting in FY 2014, all cities and towns will receive MAST Fund state aid if they comply with the fiscally prudent practices and the pension requirements, as spelled out above. In addition, municipalities will be required to increase/start funding for Post Employment Benefits Other Than Pensions (OPEB). Commencing in FY 2014, in any fiscal year in which a municipality does not annually fund its OPEB ARC at 100 percent, as determined in the latest valuation, a municipality would be required over each of the next successive ten years to increase its actual contribution to its ARC. In the first year, the municipality’s actual contribution would increase by the difference between the prior year’s ARC and its actual contribution divided by ten. For years two through ten, the annual contribution would increase by the difference between the ARC of the most recent valuation of the immediately preceding year and the actual contribution made by the municipality in the prior year divided by the remaining years. In addition, all cities and towns will be required to join a multiple employer trust once this trust is established. Cities and towns that have already established a trust as of June 30, 2010 will not be required to join a multiple employer trust for OPEB, if the city/town adheres to minimum standards established by the state.

Penalties for Non-Compliance Begin in

FY 2014- Lost Teacher Retirement Aid

The Division of Municipal Finance will monitor the progress of the cities and towns to fund its ARC. As part of its monitoring, and to determine if a city/town is eligible to receive additional aid under the MAST Fund, the Division of Municipal Finance will use the municipality’s audited financial statements and applicable actuarial valuations to make determinations of compliance. Starting in FY 2014, all cities and towns will continue to be eligible for the MAST funding allocation if they comply with the fiscally prudent practices, and the requirements to increase funding for pensions and OPEB. However, there will be a penalty for non-compliance. Those cities and towns not complying with fiscally prudent practices and the requirements relating to pension and OPEB will experience a decrease of 5 percentage points each year in the state’s share of contribution towards the employer cost of the teacher retirement fund, starting in FY 2014.

34

Retirement System Funding

The Governor recommends that the State take action in FY 2012 to increase funding to the State Employee, Teacher, State Police and Judicial Retirement Systems in order to bolster the assets in those funds. None of the State’s pension funds are fully funded, and in fact each of these funds has seen an increase in their unfunded liability over the last year. The sustainability of public pensions needs to be addressed, and once determined, the funding of the appropriate amounts to amortize the unfunded liability must be made a priority. The table below shows the actuarial unfunded liability and projected contributions based upon the 2009 valuation prepared by the actuary.

Unfunded Actuarial Liability

Funded Ratio

2009 Actuarial Contribution

Active Members

Retired Members

Inactive Members

Total Membership

State Employees' System 1,836,163,271 59.0% 126,344,715 11,023 11,142 2,496 24,661 Teachers' System 2,892,031,771 58.1% 188,858,198 13,689 9,749 2,466 25,904 State Police System 15,247,960 79.8% 3,340,746 176 4 2 182 Judicial System 4,898,819 88.3% 1,700,174 45 10 - 55

4,748,341,821 320,243,833 24,933 20,905 4,964 50,802

* Source: FY2009 Actuarial Valuations prepared by Gabriel, Roeder, Smith & Company

State Retirement Systems' Unfunded Actuarial Liabilities, Contributions, and Member Counts

The Governor proposes that members contribute 11.75% of pay reflecting an increase of 3.0 percent of pay for state employee members and 2.25 percent of pay for teacher members during FY 2012, while the State investigates the need to develop a new sustainable system that provides for a formula driven sharing of the actuarial required contributions. Under current law, the employee contribution is set in statute, so if the required contribution increases as a rate of pay, currently the State’s taxpayers pick up the difference. The proposed increase in contributions will not be offset by a reduction in employer contributions, but rather will result in increased cash flowing into the trust funds. The table below provides a historical perspective on the required payroll rates, and the sharing of those required contributions.

State Employees Teachers

Fiscal Year

Total ARC Contribution

Rate Employer Employee

Employer Share as a Percent of Total ARC

Employee Share as a Percent of Total ARC


Rate

Employer -State Share

Employer -Local Share Employee



1995 19.07% 11.32% 7.75% 59.4% 40.6% 24.52% 6.76% 9.26% 8.50% 65.3% 34.7%1996 18.20% 9.45% 8.75% 51.9% 48.1% 24.21% 6.22% 8.49% 9.50% 60.8% 39.2%1997 18.80% 10.05% 8.75% 53.5% 46.5% 24.07% 6.17% 8.40% 9.50% 60.5% 39.5%1998 19.58% 10.83% 8.75% 55.3% 44.7% 23.75% 6.00% 8.25% 9.50% 60.0% 40.0%1999 18.60% 9.85% 8.75% 53.0% 47.0% 21.02% 4.90% 6.62% 9.50% 54.8% 45.2%2000 17.32% 8.57% 8.75% 49.5% 50.5% 24.14% 6.21% 8.43% 9.50% 60.6% 39.4%2001 16.74% 7.99% 8.75% 47.7% 52.3% 21.51% 5.15% 6.86% 9.50% 55.8% 44.2%2002 14.34% 5.59% 8.75% 39.0% 61.0% 19.45% 4.22% 5.73% 9.50% 51.2% 48.8%2003 16.43% 7.68% 8.75% 46.7% 53.3% 21.47% 5.04% 6.93% 9.50% 55.8% 44.2%2004 18.35% 9.60% 8.75% 52.3% 47.7% 23.22% 5.73% 7.99% 9.50% 59.1% 40.9%2005 20.26% 11.51% 8.75% 56.8% 43.2% 24.34% 6.12% 8.72% 9.50% 61.0% 39.0%2006 23.59% 14.84% 8.75% 62.9% 37.1% 25.97% 6.75% 9.72% 9.50% 63.4% 36.6%2007 27.15% 18.40% 8.75% 67.8% 32.2% 29.14% 8.02% 11.62% 9.50% 67.4% 32.6%2008 29.52% 20.77% 8.75% 70.4% 29.6% 31.51% 8.97% 13.04% 9.50% 69.9% 30.1%2009 30.39% 21.64% 8.75% 71.2% 28.8% 29.57% 8.18% 11.89% 9.50% 67.9% 32.1%2010 29.53% 20.78% 8.75% 70.4% 29.6% 28.51% 7.76% 11.25% 9.50% 66.7% 33.3%2011 29.53% 20.78% 8.75% 70.4% 29.6% 28.51% 7.76% 11.25% 9.50% 66.7% 33.3%2012 31.73% 22.98% 8.75% 72.4% 27.6% 31.82% 9.09% 13.23% 9.50% 70.1% 29.9%

Governor's ProposalARC 2012 31.73% 22.98% 8.75% 72.4% 27.6% 31.82% 9.09% 13.23% 9.50% 70.1% 29.9%Supplemental 3.00% 2.25%Total 34.73% 22.98% 11.75% 66.2% 33.8% 34.07% 9.09% 13.23% 11.75% 65.5% 34.5%

35


As shown above, the employer share of the annual required contribution for State employees has increased from 59.4 percent to 72.4 percent from 1995 to 2012. The employer share of annual required contribution for Teachers, which is shared 60 percent local government/40 percent State government, has increased from 63.5 percent to 70.1 percent from 1995 to 2012.

State Police Judges

Fiscal Year









1995 27.80% 20.05% 7.75% 72.1% 27.9% 14.85% 7.10% 7.75% 47.8% 52.2%1996 29.62% 20.87% 8.75% 70.5% 29.5% 19.55% 10.80% 8.75% 55.2% 44.8%1997 21.21% 12.46% 8.75% 58.7% 41.3% 32.40% 23.65% 8.75% 73.0% 27.0%1998 21.41% 12.66% 8.75% 59.1% 40.9% 34.09% 25.34% 8.75% 74.3% 25.7%1999 20.18% 11.43% 8.75% 56.6% 43.4% 32.11% 23.36% 8.75% 72.7% 27.3%2000 35.37% 26.62% 8.75% 75.3% 24.7% 39.24% 30.49% 8.75% 77.7% 22.3%2001 34.64% 25.89% 8.75% 74.7% 25.3% 39.84% 31.09% 8.75% 78.0% 22.0%2002 36.42% 27.67% 8.75% 76.0% 24.0% 40.33% 31.58% 8.75% 78.3% 21.7%2003 36.23% 27.48% 8.75% 75.8% 24.2% 42.17% 33.42% 8.75% 79.3% 20.7%2004 35.52% 26.77% 8.75% 75.4% 24.6% 42.65% 33.90% 8.75% 79.5% 20.5%2005 37.62% 28.87% 8.75% 76.7% 23.3% 44.94% 36.19% 8.75% 80.5% 19.5%2006 40.10% 31.35% 8.75% 78.2% 21.8% 44.26% 35.51% 8.75% 80.2% 19.8%2007 40.53% 31.78% 8.75% 78.4% 21.6% 44.82% 36.07% 8.75% 80.5% 19.5%2008 39.75% 31.00% 8.75% 78.0% 22.0% 40.82% 32.07% 8.75% 78.6% 21.4%2009 34.78% 26.03% 8.75% 74.8% 25.2% 32.81% 24.06% 8.75% 73.3% 26.7%2010 34.78% 26.03% 8.75% 74.8% 25.2% 32.81% 24.06% 8.75% 73.33% 26.7%2011 33.33% 24.58% 8.75% 73.7% 26.3% 24.94% 16.19% 8.75% 64.92% 35.1%2012 34.14% 25.39% 8.75% 74.4% 25.6% 27.44% 18.69% 8.75% 68.11% 31.9%

Governor's ProposalARC 2012 34.14% 25.39% 8.75% 74.4% 25.6% 27.44% 18.69% 8.75% 68.1% 31.9%Supplemental 3.00% 3.00%Total 37.14% 25.39% 11.75% 68.4% 31.6% 30.44% 18.69% 11.75% 61.4% 38.6% As shown above, the employer share of the annual required contribution for the State Police system has increased from 72.1 percent to 74.4 percent from 1995 to 2012. The employer share of annual required contribution for the Judges has increased from 47.8 percent to 68.1 percent from 1995 to 2012. Both these plans are relatively new plans, including only those employees hired after December 31, 1987 and December 31, 1989, respectively. The proposed supplemental payment would be made by employees for all pay days after July, 2011. This payment would be in addition to the annual required contribution, and would enhance assets on a bi-weekly basis and would increase the cash flow of the Retirement Fund. As shown below, this supplemental payment will increase the assets of the systems by an estimated $40.7 million. This will have a direct impact on the unfunded liabilities of these systems and will increase their funding ratios.

Membership GroupFY2012 ARC Contribution

ARC Rate of Payroll

Estimated Payroll Base

Proposed Percentage

Supplemental Contribution

Estimated Dollar Value of

Supplemental Contribution

State Employees $149,885,956 22.98% $652,245,239 3.00% $19,567,357Judges 1,605,947 18.69% 8,592,547 3.00% 257,776 State Police 4,265,295 25.39% 16,799,114 3.00% 503,973 Teachers-State Share 82,671,070 9.09% 909,472,717 2.25% 20,463,136 Subtotal -State $238,428,268 $1,587,109,617 $40,792,243Teachers-Local Share 120,323,240 13.23% n/a n/a n/a

Total- State and Local Membership $358,751,508 $1,587,109,617 $40,792,243

36


The Five Year Forecast reveals the significant growth which is projected in the contributions over the next five years. According to actuarial projections by Gabriel, Roeder, Smith and Company, the annual required employer contribution rate for state employees is expected to increase from 22.98 percent in FY 2012 to 35.88 percent in FY 2016. This reflects an increase in the rate of 12.9 percentage points over a five year period. Based upon projected payroll growth and the forecasted retirement contribution rates, the general revenue funded contribution for state employee members would grow from a projected $88.1 million in FY 2012 to $162.1 million in FY 2016, reflecting growth of $74.1 million in retirement costs for state employees. This pension funding growth of 84 percent from FY 2012 to FY 2016 reflects the largest growth item in terms of percentage growth for a major categorical item. According to actuarial projections by Gabriel, Roeder, Smith and Company, the annual required employer contribution rate for teacher members is expected to increase from 22.32 percent in FY 2012 to 34.2 percent in FY 2016. This reflects an increase in the rate of 11.88 percentage points over a five year period. State contributions towards the Teacher Retirement System are projected to increase by $57.7 million, from $82.7 million in FY 2012 to $140.4 million in FY 2016. Combined, the State’s employer share contribution for state employees and teachers is projected to grow by $131.8 million from FY 2012 to FY 2016. In terms of dollar growth, this ranks second only to the $210 million growth in the whole category of grants and benefits (Medicaid) as largest dollar growth item in the budget over the planning horizon.

37

All Sources The total budget of $7,297.3 million includes all sources of funds from which state agencies make expenditures. Federal funds represent 35.0 percent of all funds. Over 69.3 percent of federal funds are expended for human services, primarily for Medicaid. Income and Sales Taxes combined represent 26.6 percent of all revenue sources. University and College Funds, and Income Support Benefit payments represent 11.0 percent, and 5.8 percent of the total, respectively. Remaining sources include: Other General Revenues, 7.1 percent; the Lottery Transfer, 4.8 percent; Restricted Receipts, 2.9 percent; and Other Funds 6.9 percent.

Where It Comes From (in millions)

Univers ity &Co llege Funds

$ 802.0

Sales Tax$ 989.5

Other Funds$ 501.1P ers o nal

Inco me Tax,$ 950.0

Res tric ted Rece ipts

$ 209.5

Federa l Funds $ 2,557.2

Inco me Suppo rt Benefit P ayments

$ 421.7

Other Genera l Revenues

$ 514.9

Lo tte ry Trans fe rs $ 351.5

38

All Expenditures The Governor’s FY 2012 Budget recommendation is $7,661.3 million in all funds comprised of six functional units of state government: human services, education, general government, public safety, transportation, and natural resources. Approximately 40.7 percent of all expenditures are for human services, comprised of agencies that engage in a broad spectrum of activities including income support, client subsidies, case management and residential support, and medical regulation, prevention, treatment, and rehabilitation services. The FY 2012 recommended budget for all human service agencies is $3,119.6 million. Approximately 28.3 percent of all expenditures are for education, which includes the Department of Elementary and Secondary Education, Public Higher Education, the Rhode Island State Council on the Arts, the Rhode Island Atomic Energy Commission, the Rhode Island Higher Education Assistance Authority, the Historical Preservation and Heritage Commission, and the Rhode Island Public Telecommunications Authority. The FY 2012 recommended budget for education is $2,170.1 million. Approximately 17.7 percent of all expenditures are for general government, which includes agencies that provide general administrative services to all other state agencies, and those that perform state licensure and regulatory functions. The FY 2012 recommended budget for all general government agencies is $1,357.2 million. Approximately 6.2 percent of all expenditures are for public safety, which is the system that provides law enforcement, adjudicates justice, protects life and property, and handles emergencies impacting Rhode Island’s citizens. The FY 2012 recommended budget for the public safety system is $475.4 million. Approximately 5.7 percent of all expenditures are for transportation, which provides for the state’s maintenance and construction of a quality transportation infrastructure. The FY 2012 recommended budget for transportation is $435.0 million. Approximately 1.4 percent of all expenditures are for natural resources, which includes the Department of Environmental Management, the State Water Resources Board and the Coastal Resources Management Council. The FY 2012 recommended budget for natural resources is $104.0 million.

Where it goes: FY 2012

General Government$1,357.217.72%

Human Services$3,119.640.72%

Education$2,170.128.33%

Transportation$435.05.68%

Natural Resources$104.01.36%Public Safety

$475.46.21%

(in millions)

39

This page was intentionally left blank.

40

General Government

General Government

Summary General Government includes agencies that provide general administrative services to all other state agencies, and those that perform state licensure and regulatory functions. It includes: most elected officials, including the Governor, Lieutenant Governor, General Treasurer, and the Legislature; administrative agencies, including the Department of Administration, the Department of Revenue, the Department of Labor and Training, the Board of Elections and the Commission for Human Rights; and regulatory agencies, including the Department of Business Regulation and the Public Utilities Commission. The Governor recommends 2,480.3 FTE positions in the revised FY 2011 budget and 2,262.3 FTE positions in FY 2012 within general government agencies. The FY 2011 revised budget for General Government agencies totals $1.753 billion, including $435.2 million in general revenue, $262.0 million in federal funds, $81.3 million in restricted receipts, and $974.9 million in other funds. The revised budget from all fund sources for General Government agencies is $72.1 million, or 4.3 percent, more than the FY 2011 enacted budget of $1.681 billion. Of the $1.753 billion recommended for FY 2011, $907.7 million is for grants and benefits, $277.8 million is for operating, $241.8 million is for personnel, $68.0 million is for local aid, $192.5 million is for debt service, $35.6 million is for capital, and $30.1 million is for operating transfers. For FY 2012, the Governor recommends expenditures of $1.357 billion for General Government programs. The programs are financed with $414.4 million of general revenues, $124.4 million of federal funds, $99.8 million of restricted receipts, and $718.6 million of other funds. The FY 2012 recommendation for General Government agencies is $324.2 million, or 19.3 percent, less than the FY 2011 enacted level.

Of the $1.357 billion recommended for FY 2012, $494.6 million is for grants and benefits, $278.2 million is for operating, $238.0 million is for personnel, $85.9 million is for local aid, $199.4 million is for debt service, $27.7 million is for capital, and $33.4 million is for operating transfers. The General Government function represents 17.7 percent of the total budget for Rhode Island.

How General Government is Financed(FY 2012, in millions)

$718.6 52.9%

$414.4 30.5%

$124.49.2%

$99.87.4%

General Revenue Federal FundsRestricted Receipts Other Funds

41

General Government

General revenue financing for General Government agencies in FY 2012 decreases by $20.2 million, or 4.6 percent, from the FY 2011 enacted appropriations. The decrease is primarily attributable to the Department of Administration, where the Governor recommends a decrease of $74.0 million. Other notable decreases include $2.0 million less in the Board of Elections, $473,963 less for the Secretary of State, $426,083 less for the Legislature, and $414,085 less for the Governor’s Office. Notable increases from the FY 2011 enacted budget recommended in FY 2012 are $56.2 million more for the Department of Revenue and $540,331 more for Business Regulations. In FY 2012, federal funds recommended in General Government agencies decrease by $141.3 million, or 53.2 percent, from the FY 2011 enacted level. The change is primarily attributable to the Department of Labor and Training, where the Governor recommends a decrease of $132.6 million. The decrease is due to the expiration of enhanced and extended federal stimulus unemployment compensation. The Governor also recommends $10.5 million less for the Department of Administration, which reflects the net changes of anticipated grant funding. Recommended FY 2011 restricted receipts increase by $22.1 million, or 28.5 percent from the FY 2011 enacted level, which includes increases of $20.3 million for the Department of Revenue, and $2.8 million for the Department of Administration, which were slightly offset by decreases of $720,870 in the Governor’s Office and $424,784 for the Department of Labor and Training. Other funds recommended in FY 2012 decrease by $184.9 million, or 20.5 percent, from the FY 2011 enacted level. This change is largely due to decrease of $205.0 million for the Department of Labor and Training and $2.5 million for the Department of Administration. The decrease in the Department of Labor and Training is mostly due to the anticipated exhaustion of unemployment benefits by the unemployed currently drawing on the fund.

How General Government is Spent(FY 2012)

Capital 2.0%

Debt Service 14.7% Operating

Transfers2.5%

Personnel17.5%

Operating 20.5%

Local Aid 6.3%

Grants, Benefits36.4%

42

General Government

Department of Administration The Governor’s FY 2011 revised budget for the Department of Administration is $524.8 million, including $325.9 million in general revenue, $103.6 million in federal funds, $25.7 million in restricted receipts, and $69.5 million in other funds. This recommendation is an increase of $25.5 million from the FY 2011 enacted budget of $499.3 million, and reflects an increase of $1.9 million, or 0.6 percent, in general revenue expenditures, an increase of $24.0 million, or 30.2 percent, in federal funds expenditures, an increase of $8.5 million, or 49.9 percent, in restricted receipts, and an decrease of $9.0 million, or 11.4 percent, of other funds. The enacted FY 2011 revised budget included savings for pension changes to the state employee retirement system. Pension reform was enacted by the General Assembly and projected savings totaling $8.2 million are included the Department of Administration budget for distribution to agencies as part of the supplemental budget process. Savings are projected at $5.7 million in general revenue, $1.3 million in federal funds, $487,960 in restricted receipts and $738,091 in other funds. These savings do not include those attributable to Teachers, which are budgeted under the Department of Elementary and Secondary Education. The $21.2 million decrease in general revenue appropriations includes a savings of $22.0 million for the repayment of the Rhode Island Capital Plan Fund (RICAP). In FY 2009, the State accessed the Budget Stabilization Fund in order to fund the revenue deficit projected after the May 2009 Revenue Estimating Conference. The transfer to the General Fund was $22.0 million. Once the Budget Stabilization Fund reaches 3.4% of total State resources, any additional funds are transferred to RICAP for capital projects. Thus, when any funds are withdrawn from the Budget Stabilization Fund, RICAP ends up receiving less revenue the following fiscal year. Under current law, any transfer from the Budget Stabilization Fund must be repaid to the RICAP fund in the year following the transfer. In the FY 2011 enacted budget, the General Assembly included $22.0 million to repay the RICAP fund. The Governor recommends amending current law to allow this repayment of $22.0 million to be delayed until after FY 2012. The Governor’s recommendation also includes a 50.0 percent increase in the $10.4 million which was appropriated to distressed communities in the enacted budget. Under this proposal, an additional $5.2 million will be distributed for a total of $15.7 million in FY 2011. Currently, as a result of the indices established by Rhode Island General Laws 45-13-12, the following communities receive funds through the Distressed Communities Relief Fund: Burrillville, Central Falls, East Providence, North Providence, Pawtucket, Providence, West Warwick, and Woonsocket. The Governor’s recommendation also includes an appropriation to the City of Central Falls over two years, $1.8 million in FY 2011 in the Department of Administration and $4.9 million in FY 2012 in the Department of Revenue’s State Aid program recommended to be moved in FY 2012. The City has been operating under the oversight of a State-appointed Receiver pursuant to An Act Relating to Cities and Towns – Providing Financial Stability, codified as Rhode Island General Laws § 45-9-1 et seq., since July 2010. In December 2010, the Receiver issued a report detailing the structural fiscal problems plaguing the City and outlining a variety of reform measures for consideration to restore the City to long-term fiscal stability. Since that time the City’s FY 2010 audit has been completed, identifying an actual year-end deficit of $2,377,596. The Receiver has identified $623,000 in City assets which may be applied to reduce this deficit, leaving a balance of approximately $1.8 million. In addition, the Receiver forecasts a deficit of approximately $4.9 million for FY 2012 which must be resolved to avoid a liquidity crisis in early FY 2012. The City currently has severely limited access to financing and cannot otherwise raise the

43

General Government

revenues necessary in the short term to resolve these deficits. The $6.7 million appropriation will eliminate these deficits and resolve the City’s projected liquidity problems for FY 2012 Additional general revenue savings also includes a savings of $2.6 million for the Historic Structures Tax Credits program due to the postponement of the issuance of new debt; a reduction of $1.4 million for department-wide personnel savings achieved by maintaining vacant positions; a reduction of $524,177 for utilities in the Facilities Management – Centralization account; a reduction of $210,000 for the Property Revaluation Program due to a revised estimate for the FY 2011 revaluation cycle; a reduction of $100,000 for expenses related to the transition of elected officials that were allocated to the Governor’s Office, the Office of the General Treasurer, and the Office of the Attorney General; and the statewide reductions of $303,877 in personnel, $515,294 in operating, and $3,925 in legal services. These savings are slightly offset by an additional $13.3 million for Debt Service which includes an additional $12.6 million for the Department of Transportation’s debt service; an additional $5.7 million to restore the general revenue portion to pension changes; an additional $904,054 for Performance Based Debt; and an additional $510,091 for the Tax Anticipation Notes due to an update on interest earnings. The Governor’s recommendation for federal funds totals $103.6 million in FY 2011, which is an increase of $24.0 million from the enacted FY 2011 budget of $79.6 million. Major changes in federal funds include an additional $9.4 million from the American Recovery and Reinvestment Act, an additional $2.5 million for the Community Development Block Grants, an additional $1.1 million for the Low Income Home Energy Assistance Program (LIHEAP) grant, an additional $834,503 for the Application Development grant, an additional $375,163 for the DOE/Weatherization grant, and an additional $370,831 for the Library Services Technology grant that are partially offset by a reduction of $2.1 million for the HHS/Weatherization grant and a reduction of $109,872 for the Nlg Museum - Collecting to Collections grant. The additional American Recovery and Reinvestment Act stimulus funds include $6.2 million in the State Energy Plan, $1.8 million in the Energy and Conservation Block Grant, $1.7 million for DOE –Weatherization, and $333,316 in Community Development Block Grant (CDBG) program that are partially offset by a reduction of $327,976 in the Homelessness Prevention Fund, a reduction of $130,218 in the Energy Assurance Planning grant, a reduction of $316,490 in the Information Technology grant. The Governor’s recommendation for restricted receipts totals $25.7 million in FY 2011, which is an increase of $8.5 million from the enacted FY 2011 budget of $17.1 million. This increase is primarily due to an additional $5.2 million for the Regional Greenhouse Gas Initiative program, $1.3 million for the Debt Service Payments, $1.6 million for the Demand Side Management grant program, and $487,960 for the pension reform. The Governor’s recommendation for other funds totals $69.5 million in FY 2011, which is a decrease of $9.0 million from the enacted FY 2011 budget of $78.5 million. The decrease is largely due to the reduction of $13.4 million for the operating transfer for debt service related to the Department of Transportation that is slightly offset by a reduction of $4.2 million in Rhode Island Capital Plan Fund (RICAP). The major changes in RICAP include an additional $956,990 for the Veterans Memorial Auditorium project, an additional $629,927 for the replacement of Fueling Tanks project, an additional $550,000 for the Zambarano buildings project, an additional $550,023 for the Cannon Building project, and an additional $527,500 for the McCoy Stadium project. The Governor recommends a total of 873.6 FTE positions for the Department of Administration in the FY 2011 revsied budget, an increae of 2.0 FTE positions from the enacted authorization of 871.6 FTE positions.

44

General Government

The Governor’s FY 2012 budget for the Department of Administration is $415.0 million, including $250.0 million in general revenue, $69.1 million in federal funds, $19.9 million in restricted receipts, and $76.0 million in other funds. This recommendation is an decrease of $84.3 million from the FY 2011 enacted budget of $499.3 million, and reflects an decrease of $74.0 million, or 22.8 percent, in general revenue expenditures, an decrease of $10.5 million, or 13.2 percent, in federal funds expenditures, an increase of $2.8 million, or 16.1 percent, in restricted receipts, and an decrease of $2.5 million, or 3.2 percent, of other funds. The $74.0 million decrease in general revenue appropriations includes: a savings of $22.0 million for the repayment delay of the Rhode Island Capital Plan Funds (RICAP); a savings of $49.1 million due to the transfer of General State Aid to the Department of Revenue; and a savings of $17.2 million due to the transfer of Security Services – Sheriffs to the Department of Public Safety. Additional general revenue savings also includes a savings of $1.2 million for the Historic Structures Tax Credits program due to the postponement of the issuance of new debt and a savings of $1.9 million in operating and supplies. These savings are slightly offset by an additional $2.5 million for salaries and benefits and an additional $1.3 for capital purchases. The Governor’s recommendation for federal funds totals $69.1 million in FY 2012, which is an decrease of $10.5 million from the enacted FY 2011 budget of $79.6 million. Major changes in federal funds include a reduction of $17.3 million from the American Recovery and Reinvestment Act and a reduction of $1.3 million for the Low Income Home Energy Assistance Program (LIHEAP) grant that is partially offset by an additional $3.6 million for the Community Development Block Grants, an additional $1.5 million for the Application Development grant, an additional $1.4 million for the HHS/Weatherization grant, and an additional $1.3 million for pension reform. The reduction in American Recovery and Reinvestment Act stimulus funds include a reduction of $8.6 million in the State Energy Plan, a reduction of $4.5 million for DOE –Weatherization, a reduction of $2.7 million in the Energy and Conservation Block Grant, a reduction of $1.1 million in the Homelessness Prevention Fund, and a reduction of $316,490 in the Information Technology grant that is slightly offset by an additional $333,316 in Community Development Block Grant (CDBG) program. The Governor’s recommendation for restricted receipts totals $19.9 million in FY 2012, which is an increase of $2.8 million from the enacted FY 2011 budget of $17.1 million. This increase is primarily due to an additional $1.7 million for the Debt Service Payments, $1.2 million for the Demand Side Management grant program, and $487,960 for the pension reform that is partially offset by a reduction of $904,386 for the Regional Greenhouse Gas Initiative program and a reduction of $957,497 for Car Rental Tax and Surcharge. The Governor’s recommendation for other funds totals $76.0 million in FY 2012, which is a decrease of $2.5 million from the enacted FY 2011 budget of $78.5 million. The decrease is largely due to the reduction of $4.4 million in Rhode Island Capital Plan Fund (RICAP) that are slightly offset by an increase of $1.7 million for the operating transfer for debt service related to the Department of Transportation. The major changes in RICAP include a reduction of $3.9 million for the Information Operations Center project, a reduction of $1.5 million for the Neighborhood Opportunities Program project, a reduction of $1.1 million for the Veterans Auditorium project, and an increase of $2.5 million for the RIFANS implementation project.

45

General Government

The Governor recommends a total of 693.6 FTE positions for the Department of Administration in the FY 2012 budget, a decreae of 178.0 FTE positions from the enacted authorization of 871.6 FTE positions. This redcution includes the transfer of Security Services – Sheriffs 180.0 FTE positions to the Department of Public Safety.

Department of Business Regulation The Governor recommends a revised FY 2011 Budget of $11.4 million, including $8.9 million in general revenue, $758,454 in federal funds, and $1.7 million in restricted receipts. All funds increase $517,358 from the enacted FY 2011 Budget. Most of this increase is in federal funds for three grants in Insurance and the Office of Health Insurance Commissioner. In general revenues, which fall $236,692 from the enacted level, personnel costs decrease by $221,966, contract services increase by $31,973, and statewide adjustments in personnel, contract services, and operating are a net decrease of $46,699. For FY 2012, the Governor recommends $12.9 million, including $9.7 million in general revenue, $1.5 million in federal funds, and $1.7 million in restricted receipts. All funds increase by $2.0 million, of which general revenues increase $540,331, from the FY 2011 enacted level. Personnel costs increase by $899,466, including a 3.0 percent cost of living adjustment, and a decrease of $26,682 is in operating expenses. Statewide adjustments affect personnel expenses: a net decrease of $335,026 is due to decreased medical insurance expense of $48,962 and additional turnover of $286,064, offset by a statewide increase for benefits of $8,301, and a net decrease of $5,726 for operating and contract services. Restricted receipts increase $24,064 from the FY 2011 enacted level. Federal funds increase $1.46 million for the continuation of the three federal grants. As part of the FY 2012 Budget, the Governor recommends that the Office of Health Insurance Commissioner be split out as a separate program within the Department of Business Regulation. This program was formerly part of the Insurance Regulation program, but due to the independent nature of the Office, elevating it to an independent program is recommended. The Governor recommends a total of 93.0 FTE positions in FY 2011 and FY 2012, an increase of 3.0 FTE positions for the federal grants from the enacted level.

Department of Labor and Training The Governor recommends revised FY 2011 expenditures of $864.0 million for the Department of Labor and Training, including $7.0 million in general revenue, $153.4 million in federal funds, including Stimulus – Extended Unemployment Compensation funding of $76.0 million and $20.0 million in Stimulus – Federal Additional Compensation funds, $18.0 million in restricted receipts, $788,584 in Rhode Island Capital Plan Fund financing and $685.5 million in other funds. The revised Budget reflects a total increase of $30.4 million, including personnel reductions of $3.6 million, reductions in contract services of $1.3 million, reductions in operating of $2.4 million, an increase in assistance and grants of $23.2 million, an increase of $1.3 million for capital purchases and an increase of $10.5 million in operating transfers. The revised FY 2011 Budget includes general revenue savings of $111,418, comprised of a $62,973 increase in personnel, savings of $62,413 in contracted professional services, savings of $29,333 in operating expense, savings of $101,982 in assistance and grants and an increase of $19,337 in capital purchases. The revised FY 2011 Budget reflects an increase of $1.1 million in contracted professional services for information technology expense. The revised Capital Budget includes $970,891 for the purchase of computer equipment and $857,309 for building renovations, improvements and repairs and $788,584 for the replacement of the Center General Building roof.

46

General Government

In assistance and grants, $31.1 million has been made available for training grants from the American Recovery and Reinvestment Act of 2009 (ARRA) and includes carryover from 2010. ARRA funds are utilized for training grants and were also used to reopen the Wakefield netWORKri center in October of 2010, increasing access to employment and training services. In January of 2011, $1.9 million of Unemployment Compensation Modernization Incentive Payments were made available under Section 903(f) of the Federal Social Security Act. The additional financing was enacted for administration of the state’s unemployment compensation law from January 1, 2011 through June 30, 2011. The Department of Labor and Training is using these funds to compensate 42.0 short term FTE’s through the end of the fiscal year. The Governor recommends 519.4 FTE positions in FY 2011, the same level as the enacted Budget. The recent fund balance trends for both the Employment Security Trust Fund and the Temporary Disability Insurance (TDI) Trust Fund are shown in the graphs below. It should be noted that Rhode Island’s Employment Security Fund is in a declining condition due to the state’s high unemployment rate. As of the end of calendar year 2010, the Employment Security Trust Fund and the TDI Trust Fund had negative balances of $183.0 million and $105.0 million, respectively. These balances represent Unemployment Insurance decreases of $62.0 million (51.2 percent) and TDI decreases of $6.0 million (5.4 percent) in 2010, respectively. Revised estimates indicate continued borrowing from the federal Department of Labor through December 31, 2011.

Unemployment Insurance Fund Activity1980 - 2010

-300

-200

-100

0

100

200

300

400

500

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

Mill

ions

of D

olla

rs

Taxes Payments Balance

47

General Government

Temporary Disibility Insurance Fund Activity1980 - 2010

0

20

40

60

80

100

120

140

160

180

200

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

Mill

ions

of D

olla

rs

Taxes Payments Balance

For FY 2012, the Governor recommends $495.7 million for the Department of Labor and Training, including $7.3 million in general revenue, $49.3 million in federal funds, $17.1 million in restricted receipts, $208,500 in RICAP financing and $421.8 million in other funds. This is a decrease of $337.9 million from the FY 2011 enacted Budget, and includes $145,923 more general revenue, $132.6 million less federal funds, including reductions in Stimulus – Extended Unemployment Compensation funding of $98.0 million and Stimulus – Federal Additional Compensation funding of $30.0 million, $424,784 million less restricted receipts, $536,556 less capital expense funds and $205.0 million less other funds. The FY 2012 Budget reflects a personnel savings of $4.1 million, increases in contract services of $81,725, operating savings of $2.3 million, assistance and grants savings of $345.3 million, capital expense savings of $632,249 and an increase of $14.4 million for operating transfers. Personnel savings include a reduction of $156,259 due to medical and retiree health rate changes and removal of 3.0 percent in additional statewide turnover. FY 2012 personnel expense reflects the absence of the 42.0 short terms FTE’s, which were funded through the end of FY 2011, accounting for a large portion of the $4.1 million decrease. In the consulting expense category, $1.4 million will be utilized for information technology and $1.5 million will be utilized for medical services. The increase in operating transfers includes $10.0 million in additional financing, which will be utilized to pay interest on federal funds that have been borrowed to finance the state’s Unemployment Insurance obligations. In capital expense, $208,500 in RICAP funds have been allocated for asset protection and $454,946 has been allocated for the purchase of computer equipment. The Governor recommends a FY 2012 FTE authorization of 519.4 FTE positions for the Department of Labor and Training, the same as the revised FY 2011 level.

48

General Government

Department of Revenue In the 2006 Session, the General Assembly created the new Department of Revenue, comprised primarily of programs transferred from the Department of Administration. These programs include the Office of Municipal Finance (formerly Property Valuation), the Division of Taxation, the Registry of Motor Vehicles, and the Lottery. Other programs created within this department include the Director of Revenue and the Office of Revenue Analysis. The Governor recommends $260.1 million in expenditures for the Department of Revenue in the FY 2011 revised budget, including $36.1 million in general revenue, $2.4 million in federal funds, $2.0 million of restricted receipts, and $219.6 million in other funds. This represents an all funds increase of $23.8 million from the enacted FY 2011 budget. General revenue expenditures increase $651,565, primarily due to the expenditures related to Central Fall Receivership totaling $941,583, which were not included in the enacted budget. Personnel decreased $212,667 to $28.0 million, including a statewide adjustment for additional turnover of $132,411. Personnel in FY 2011 included four pay reduction days for all state employees, a deferred COLA, and additional medical health reductions. Federal funds increase by $202,047. Restricted receipts increase by $1.1 million as a result of expenses of the RIMS computer project at the Division of Motor Vehicles paid with the technology charge at the DMV that were greater than originally enacted. Other funds increase by $21.9 million, primarily due to an estimated increase in the Lottery collections, which translates into increased commission payments combined with new marketing expenses financed by the State at Twin River and Newport Grand. Offsetting the increase in other funds was a decrease in RICAP projects totaling $922,743, a combination of reductions in the Forand Building project as the new main branch of the DMV opened in August 2010 and a small decrease in the Tax Data Warehouse project due to the expected timing of expenditures. The Governor recommends $335.9 million in expenditures from all funds for the Department of Revenue in FY 2012, including $91.7 million in general revenue, $2.6 million in federal funds, $21.2 million of restricted receipts, and $220.3 million in other funds. This represents an all funds increase of $26.1 million from the enacted FY 2011 budget. The primary cause of the increase in all funds, general revenues, and restricted receipts in FY 2012 is the transfer of the State Aid accounts to the Department of Revenue from the Department of Administration. General revenue expenditures increase $54.3 million, with personnel expenditures decreasing by $389,426 to $29.7 million, including statewide adjustments. The statewide adjustments include reductions of $21,024 for unachieved personnel savings, offset by a decrease of $185,398 for an adjustment to health benefits, an increase of $21,761 for retiree health benefits, offset by a decrease of $918,889 for additional turnover. There were additional statewide savings for legal contract services totaling a decrease of $83,774, and an operating reduction of $64,321. Federal funds increase by $346,289. Restricted receipts increase $20.4 million, due to the transfer of the State Aid accounts including the MAST Fund restricted receipt account totaling $19.3 million. This is a new program not included in the enacted budget. Other funds increase by $22.3 million. This change is in part due to an estimated increase in Lottery collections, which have a corresponding impact on Lottery expenditures. The new marketing program financed by the State for Twin River and Newport Grand impacts the increase expenditures. Offsetting this increase is a decrease of $2.8 million in the RICAP funds for the Forand Building which was completed in FY 2011. Governor Chafee’s proposed FY 2012 budget includes an appropriation to the City of Central Falls over two years, $1.8 million in FY 2011 (budgeted in the Department of Administration) and $4.9 million in

49

General Government

FY 2012. The City has been operating under the oversight of a State-appointed Receiver pursuant to An Act Relating to Cities and Towns – Providing Financial Stability, codified as Rhode Island General Laws § 45-9-1 et seq., since July 2010. In December 2010, the Receiver issued a report detailing the structural fiscal problems plaguing the City and outlining a variety of reform measures for consideration to restore the City to long-term fiscal stability. Since that time the City’s FY 2010 audit has been completed, identifying an actual year-end deficit of $2.4 Million. The Receiver has identified $623,000 in City assets which may be applied to reduce this deficit, leaving a balance of approximately $1.8 million. In addition, the Receiver forecasts a deficit of approximately $4.9 million for FY 2012 which must be resolved to avoid a liquidity crisis in early FY 2012. The City currently has severely limited access to financing and cannot otherwise raise the revenues necessary in the short term to resolve these deficits. The $6.7 million appropriation will eliminate these deficits and resolve the City’s projected liquidity problems for FY 2012. The Governor recommends 428.5 FTE positions in FY 2011 and FY 2012, an increase of 2.5 FTE positions from the enacted FY 2011 level. The increase reflects the assignment of two positions to Central Fall’s Receivership, and 0.5 to increase a 0.5 Customer Service Representative positions at the DMV to a 1.0 FTE position.

Legislature The Governor’s revised FY 2011 Budget for the Legislature is $38.5 million, including $37.0 million in general revenue and $1.6 million in restricted receipts. The recommendation includes a reduction of $504,045 to general revenue appropriations and an increase of $306 in restricted receipts from the FY 2011 enacted level. The general revenue recommendation does not include the reappropriation of $3.4 million from FY 2010 to reflect the Legislature’s budget request. Also reflecting the Legislature’s budget request, the Governor’s recommendation includes $300,000 for the redistricting exercise based on the results of the 2010 Census, or $1.2 million less than the FY 2011 enacted level, with a portion of the balance recommended for FY 2012. Other changes include addition of $100,000 for the House Sound System Project and addition of $600,000 in grants in the Joint Committee on Legislative Affairs account. Personnel financing totals $31.9 million, or $105,055 less than the FY 2011 enacted level. The personnel change is comprised of decrease of $48,171 from legislators’ salaries based on the calendar year 2009 Consumer Price Index of negative 0.05%, removal of $52,533 from the actuarial based retiree health computation for the legislators, and removal of $212,948 in general revenue from the Auditor General personnel budget based on current staffing levels and availability of financing from the 0.05% audit fee available to the program for personnel offsets. These reductions are offset by increase of $78,313 in the House Fiscal Office, $21,722 in Legislative Council, and $200,041 more in the Joint Committee on Legislative Affairs to finance existing staff and associated benefits. The Governor’s recommendation also removes an additional $144,864 in personnel financing, or 0.5 percent as a statewide reduction. Operating expense is also reduced by 0.5 percent in FY 2011, or by $11,864, reflecting the statewide operating expense reduction. For FY 2012, the Governor recommends $38.7 million, including $37.0 million in general revenue and $1.6 million in restricted receipts. The recommendation is a decrease of $426,083 from enacted general revenue and an increase of $74,191 in restricted receipts. The general revenue change is comprised of restoration of $700,000 for the redistricting project, as the project is expected to span two fiscal years. Department-wide personnel growth is $1.0 million, to accommodate step and longevity increases, the 3.0 percent cost of living adjustment and associated benefit adjustments. The salaries of legislators also increase by 3.0 percent though the calendar year 2010 Consumer Price Index will likely adjust these

50

General Government

salaries in the supplemental process. The retiree health calculation for legislators declines by 49.14 percent or $866,620, from 95.49 percent of salaries to 46.35 percent of salaries due to actuarial recalculation based on the current retiree pool. The Governor’s recommendation also removes $631,559 in general revenue personnel and $22,346 in operating expense as part of a statewide expense reduction. The Governor recommends 298.5 FTE positions in FY 2011 and FY 2012, or 2.6 FTE greater than the enacted Budget authorization.

Office of the Lieutenant Governor The Governor’s revised FY 2011 budget for the Office of the Lieutenant Governor is $889,100, financed by general revenue. This is $35,379 less than the enacted Budget and includes a $45,975 decrease in personnel financing to correspond to current requirements, a $500 increase in contracted professional services, a $9,096 increase in operating expense and a $1,000 increase in capital expense. In the consultant category, an increase of $500 will provide sign language translation services for the Executive Director of the Commission for the Deaf and Hard of Hearing as a member of the Rhode Island Emergency Management Advisory (RIEMA) committee. In the operating category, $1,000 is provided for printed materials related to the promotion and administration of the Lt. Governors Buy Local RI initiative. For FY 2012, the Governor recommends $997,002 from general revenue. This is $72,523 greater than the enacted Budget and includes increases of $67,027 for personnel requirements, $500 for contracted professional services, and $6,746 for operating expense. These increases are partially offset by a reduction of $1,750 for capital expense. Personnel costs include the following statewide adjustments: a $752 increase in retiree health due to statewide rate changes and a statewide change in medical health benefits resulting in a decrease of $4,359. The Governor recommends 7.0 FTE positions in revised FY 2011 and 7.0 FTE positions in FY 2012, a reduction of 1.0 FTE from the enacted FY 2011 level.

Secretary of State The Governor’s revised FY 2011 Budget for the Secretary of State is $8.2 million, including $6.8 million in general revenue, $127,092 in federal funds, $459,436 in restricted receipts and $822,941 in Record Center Funds. General revenue decreases by $154,490 from the enacted budget, federal funds increase by $27,092, restricted receipts decrease by $35,131 and Record Center Funds increase by $2,427. The decrease in general revenue is primarily due a $103,945 reduction in personnel to correspond to current requirements. In federal funds, the recommendation includes an additional $50,000 in capital expense financed by Help America Vote Act (HAVA) grants, contributing to the purchase of new servers for the Central Voter Registration System (CVRS). This increase is offset by a $100,000 reduction in HAVA federal funds that were included in the enacted Budget for compliance with the federal Military and Overseas Voter Empowerment (MOVE) Act. The necessary steps for compliance were accomplished internally, resulting in a $100,000 reduction from the enacted Budget. The Governor’s revised Budget also includes an additional $24,249 in HAVA federal funds in the Elections and Civics program’s consultant and operating categories to finance mock elections to be held at various high schools. Record Center Funds, which total $822,941, provide a centralized location for state records and archives financed by centralized billings of all the departments that utilize the service. For FY 2012, the Governor recommends $7.8 million, including $6.4 million in general revenue,

51

General Government

$496,548 in restricted receipts, and $866,270 in Record Center Funds. This recommendation reflects a $473,963 reduction in general revenue, a $1,981 increase in restricted receipts, and a $40,902 increase in Record Center Funds. General revenue savings of $571,574 from the enacted Budget are due to reduced operating expense for the Elections and Civics program, including $515,000 reduction in outside printing expense and a $60,000 reduction in postage and postal services expense due to FY 2012 not being a general election year. General revenue savings of $250,000 are attributable to reduced IT system support in the Corporations program. The FY 2012 reduction also reflects $100,000 less in HAVA federal funds obtained by achieving compliance with the MOVE Act internally. The FY 2012 Budget also reflects reductions of $15,050 in outside printing expense which was utilized in FY 2011 for printing of the Government Owner’s Manuals required per RIGL 22-3-12 which is not required for FY2012. Other decreases include a reduction of $20,186 due to changes in medical and retiree health rates. These cost savings are mitigated by the expectation that the HAVA grant will no longer be available in FY 2012, which shifted costs to general revenue. A $383,667 increase in personnel expense partially offsets general revenue cost savings. The Governor recommends 57.0 FTE positions in FY 2011 and FY 2012, which is no change from the enacted authorization.

Office of the General Treasurer

The Governor recommends a revised FY 2011 Budget of $27.4 million for the Office of the General Treasurer, including $2.3 million in general revenue, $1.1 million in federal funds, $23.8 million in restricted receipts, and $227,153 in other funds. The revised Budget for all funds represents a decrease of $5.7 million from the enacted level. Net changes to the enacted Budget consist of decrease of $17,035 in general revenue, increase of $7,428 in federal funds, and increase of $8,238 in other funds. Restricted Receipts decrease by $5.7 million, attributable to removal of $4.5 million from the Employees’ Retirement System of Rhode Island to correspond with financing requirements for a new membership system database in addition to removal of $282,632 for constrained personnel and $320,505 from consultant estimates. The Unclaimed Property transfer to the general fund surplus is reduced by $682,247 to a total of $5.3 million and claim payouts are reduced by $83,091 to $8.6 million, reflecting revenue and expenditure trend projections for the program. The general revenue recommendation for FY 2011 includes removal of $96,974 in turnover in the General Treasury, offset by addition of $36,831 for transition expense associated with the November 2010 election and $49,260 for lease and preliminary moving expense required by delay of the Office’s move to 50 Service Avenue in Warwick. The general revenue personnel level also includes additional statewide turnover of one percent. Department-wide and across all funds, personnel financing decreases by $399,405 from the enacted level, reflecting reduced requirements for part-year employees of the newly elected Treasurer and constrained hiring in all divisions. For FY 2012, the Governor recommends total expenditures of $32.7 million, which includes $2.2 million from general revenue, $1.1 million from federal funds, $29.1 million from restricted receipts, and $217,021 from other funds. Across all funds and department-wide, personnel financing totals $8.3 million, or $605,105 more than the FY 2011 enacted level. The increase is attributable to the 3.0 percent cost of living adjustment effective July 1, 2011, in addition to increased retirement contribution rates, increase to the health insurance premium, and increase to retiree health and medical rates. Reductions to personnel includes additional statewide turnover in the amount of two percent. Operating expense decreases by $631,885 department-wide, mostly attributable to reduction of $335,875 for the unclaimed

52

General Government

property transfer based on revenue and expenditure trend projections for the program, offset by addition of $144,178 for lease expense to accommodate delay in move of the office to its 50 Service Avenue location. A statewide reduction of 1.0 percent in operating expense totals $3,425 for the Treasury in FY 2012. In the Employees’ Retirement System program, $4.5 million is provided in the capital expense category, same as the FY 2011 enacted amount, for implementation of the new membership computer system. Consultant expense in the program is reduced by $334,905 to a total of $2.0 million, reflecting estimated legal services requirements for the administration and investment sections. The Governor recommends an authorized FTE level of 82.0 positions in both FY 2011 and FY 2012.

Board of Elections The Governor’s revised FY 2011 Budget for the Board of Elections is $3.2 million in general revenue. The recommendation is $738,139 less than the enacted Budget. In the personnel category, there is a decrease of $132,611 to correspond to current requirements. A $300,000 reduction in assistance and grants expenses for public finance of elections is due to lower than anticipated candidate requests from the Matching Public Funds Program. A $105,000 decrease in the consulting category is achieved by performing the audit of the Matching Public Funds Program for general office candidates in-house rather than hiring an external vendor. A decrease of $3,000 in the consulting category is for environmental services not required since communities did not file for removal of asbestos cabinets in FY 2011. Notable savings in the operating category include $76,000 from printing by outside vendors due to reduced need and reduction of $11,000 in office supplies and equipment expense by bulk purchasing and reductions in purchasing. An additional $12,000 is included in the FY 2011 revised Budget for additional supplies for the packaging of materials for the November 2010 election. Personnel is reduced by $132,611 to correspond to current requirements. For FY 2012, the Governor recommends $1.9 million in general revenue, a $2.0 million dollar reduction from the FY 2011 enacted Budget. Of the reduction, $2.4 million is due to the costs associated with running the 2010 general elections. This reduction includes temporary staff, supplies, and general operating expenditures, as well as $2.0 million for the Matching Public Funds Program available to general election candidates. The Board of Elections will achieve additional consultant savings by extending the service contract with Electronic Systems & Software for the AutoMark voting machines for $350,000, rather than replacing the machines for $1.2 million. The recommendation also includes $81,000 for outside printing expense related to printing campaign finance, voter registration and election-related forms, manuals, and posters for the 2012 Presidential Preference Primary. These materials must be produced in both English and Spanish. A $70,927 increase from the FY 2011 enacted Budget is required for personnel financing. Part of the increase in personnel financing is attributable to the Chief Auditor position which the Governor recommends to fill in FY 2012. The Governor recommends 11.0 FTE positions in FY 2011 and 12.0 FTE positions in FY 2012, allowing the Chief Auditor position to be filled.

53

General Government

Rhode Island Ethics Commission

The Governor recommends a revised FY 2011 Budget for the Rhode Island Ethics Commission of $1.5 million, composed entirely of general revenue. This is $27,790 less than the FY 2011 enacted level. The revised Budget reflects reductions of $19,448 to bring personnel funding in line with current requirements. Operating expenses are reduced by $9,667, attributable to reductions of $1,800 for printing by outside vendors, $1,500 for office supplies and equipment, and $4,167 for other operating expenses. An increase of $1,325 in the capital category will be utilized for the replacement of the main printer and aging staff computers. For FY 2012, the Governor recommends $1.6 million composed entirely of general revenue. This is $77,349 greater than the enacted Budget and includes an increase of $91,415 for personnel requirements representing a fully staffed office for the entire year, a reduction of $13,891 for operating expense, and a decrease of $175 for capital expenses. Changes in retiree health and medical insurance rates result in an increase of $1,382 in the personnel category. The Governor recommends the enacted level of 12.0 FTE positions in FY 2011 and FY 2012.

Office of the Governor The Governor’s revised FY 2011 Budget for the Office of the Governor is $5.3 million, including $4.4 million in general revenues, $132,605 in federal funds and $719,684 in restricted receipts. The recommendation is an all funds decrease of $983,958, including $337,701 less in general revenues, $132,605 more in federal funds, and $778,862 less in restricted receipts. The general revenue decrease is derived by adjusting staff expenses to conform to the new gubernatorial staff, whose members start at the lowest step of their paygrade without longevity, in addition to operational savings. The reductions are offset by addition of $126,230 for transition expense for the newly elected Governor. The general revenue recommendation also includes $250,000 for the Governor’s Contingency Fund. The federal fund increase represents financing from the State Energy Office in the Department of Administration that supports staff in the Governor’s office for associated work. The restricted receipt decrease reflects reduced staff levels in the Office of Economic Recovery and Reinvestment (OERR) which completed most of its work associated with administering and complying with the provisions of the American Recovery and Reinvestment Act (ARRA) in FY 2010, though ARRA funds continue to be appropriated in FY 2011 and FY 2012, thus requiring the continuance of the office. The restricted receipts are made available by a federal Office of Management and Budget memorandum 09-18 that allows up to 0.5 percent of stimulus funding to cover oversight expenses. Also in FY 2011 and reflected in the general revenue financing level, is removal of $11,056 in personnel, and $1,564 in operating expense, as part of the statewide reduction exercise. The Governor’s revised FY 2012 Budget for the Office of the Governor is $5.2 million, including $4.3 million from general revenue, $139,898 from federal funds and $777,676 in restricted receipts. The recommendation represents a decrease of $414,085 to enacted general revenue and includes $250,000 for the Governor’s Contingency Fund. The federal recommendation again reflects energy related staff work financed by the State Energy Office. The restricted receipts will fund OERR. The recommended budget includes turnover savings for vacancies, and statewide benefit adjustments for the medical waiver, health insurance and retiree health. In addition, the financing level accommodates removal of $117,339 in personnel and $2,863 in operating expense as part of the statewide reduction exercise in FY 2012.

54

General Government

The Governor recommends 45.0 FTE positions in FY 2011 and FY 2012, comprised of 39.0 for the Office of the Governor and 6.0 for OERR, same as the enacted levels for both offices.

Rhode Island Commission for Human Rights

The Governor recommends a revised FY 2011 budget of $1.4 million for the Rhode Island Commission for Human Rights, including $1.2 million in general revenue and $164,367 in federal funds. This is $15,247 or 1.1 percent more than the FY 2011 enacted budget, consisting of $207,569 more general revenues and $192,322 less federal funds. The increase in general revenue and decrease in federal funds is due primarily to an operating (structural) deficit in federal funds arising from higher operating costs not matched by the revenues generated for cases co-filed with the US Equal Opportunity Commission and the US Department of Housing and Urban Development. For FY 2012, the Governor recommends total expenditures of $1.5 million, including $1.2 million in general revenue and $301,552 in federal funds. Compared to the FY 2011 enacted budget, the FY 2012 recommended expenditures are $83,903 more, consisting of $139,060 more general revenues and $55,157 less federal funds. The increase in general revenue is due to shift from federal funds of $55,157 due to the operating (structural) deficit alluded to for FY 2011 revised operating activities and the balance of $83,090 for current service cost adjustments related to personal services costs, which include a three percent salary cost of living adjustment, as well as revised working rates for medical and non-medical employee benefits. The Governor recommends 14.5 FTE positions in the FY 2011 revised and FY 2011 budgets, the same level authorized in the FY 2011 appropriations act.

Public Utilities Commission The Governor recommends revised FY 2011 total expenditures of $7.7 million for the Public Utilities Commission, comprising of $296,330 from federal funds and $7.4 million from restricted receipts. This recommendation is $11,636 less than the enacted appropriation and consists of $11,636 less restricted receipts, all of which relates to less than anticipated operating supplies and expense. For FY 2012, the Governor recommends total expenditures of $8.1 million, consisting of $309,373 from federal funds and $7.8 million from restricted receipts. This reflects an increase of $378,350 or 4.9 percent from the FY 2011 enacted budget and consists of $13,043 more federal funds and $365,307 more restricted receipts. The net increase in restricted receipts expenditures reflect current service adjustments for personal services costs, including a three percent salary cost of living adjustment and revised medical and non-medical working rates as provided and determined by the State Budget Office. The Governor recommends 46.0 FTE positions in the FY 2011 revised and FY 2012 budget recommendations, the same as the enacted budget.

55


56

Human Services

Human Services

Summary The Human Services function of state government engages in a broad spectrum of activities including, but not limited to, income supports, client subsidies, case management and residential supports, and medical regulation, prevention, treatment, and rehabilitation services. For FY 2011, the Governor recommends a revised all funds budget of $2.930 billion. Of this total, there is $1.031 billion in general revenues, $1.842 billion in federal funds, $42.0 million in restricted receipts, and $14.7 million in other funds. This reflects a reduction of $798,043 in general revenues, an increase of $90.5 million in federal funds, a decrease of $151,566 in restricted receipts, and a decrease of $3.0 million in other funds relative to the FY 2011 enacted budget. The Governor recommends 3,645.2 full-time equivalent positions in the FY 2011 revised budget, which is an increase of 84.6 FTE positions from the FY 2011 enacted budget. Total staffing authorizations recommended for FY 2012 are 3,651.7 FTE. For FY 2012, the Human Services departments and agencies continue to leverage their resources so that both individuals and families achieve maximum potential and self-sufficiency. The social and economic needs of clients continue to be provided by the Executive Office and Health and Human Services, which oversees the Departments of Children, Youth, and Families; Elderly Affairs; Health; Human Services; Behavioral Healthcare, Developmental Disabilities, and Hospitals; and Veterans’ Affairs. The Governor remains a stalwart advocate of building a sustainable safety net in Rhode Island, with adequate programs of medical and cash assistance for the most vulnerable populations of the State, such as low-income children, parents, pregnant women, frail elders, veterans, the medically needy, and those with physical and developmental disabilities. The Governor is further committed to preventing child abuse and neglect by intervening for and on behalf of abused and neglected children and youths and rehabilitating delinquent youth through education and training at DCYF. The dual role of advocacy and education continues to be provided by agencies including the Offices of the Child Advocate and Mental Health Advocate, the Governor’s Commission on Disabilities, and the Commission on the Deaf and Hard of Hearing. The Governor’s proposed funding level of $2.960 billion for FY 2012 protects services for the State’s most vulnerable populations. This proposal consists of $1.039 billion in general revenues, $1.858 billion in federal funds, $47.3 million in restricted receipts, and $16.6 million in other funds. The FY 2012 recommendation constitutes 39.4 percent of the total proposed expenditures for the state. Social services block grants and federal financial participation for medical assistance programs constitute the primary sources of federal funding. The chart below displays funding by source for the Governor’s FY 2012 recommendation for the human service agencies and departments.

57

Human Services

How it is Financed

General Revenue

35.1%

Restricted Receipts

1.6%

Federal Funds62.8%

Other Funds0.6%

General Revenue Federal Funds Restricted Receipts Other Funds

The Governor’s FY 2012 recommendation includes direct and purchased services for residential care, medical care, and preventive health services, cash payments to individuals, and grant funding for non-governmental agencies. The operating costs associated with the administration of these social services programs are also included. Personnel, which includes purchased services, accounts for $399.8 million, or 13.5 percent, of all expenditures programmed for human services. Other operating expenditures are recommended at $77.0 million, or 2.6 percent, of proposed total human services expenditures, with capital purchases slated for $19.0 million, or 0.6 percent. Grants and benefits expenditures of $2.459 billion account for the largest outflow of identified resources, reflecting 83.1 percent of the total human services function. The chart below shows the outflows of all resources by category of expenditure for the human services function.

58

Human Services

How it is Spent

Operating Supplies and

Expenses2.6%

Personnel13.5%

Operating Transfers

0.2% Capital

Purchases and Equipment

0.6%

Assistance, Grants and

Benefits83.1%

Personnel Operating Supplies and Expenses Aid To Local Units Of Government Assistance, Grants and Benefits Capital Purchases and Equipment Debt Service Operating Transfers

59

Human Services

Executive Office of Health and Human Services

The Governor recommends total expenditures of $7.7 million for the revised FY 2011 budget of the Executive Office of Health and Human Services (EOHHS). This is comprised of general revenues totaling $3.5 million, federal funds of $3.3 million, and restricted receipts of $891,857. Relative to FY 2011 enacted levels, recommended general revenue financing increases by $120,949, or 3.5 percent, while federal financing increases by $435,483 million, or 15.2 percent. Restricted receipts, representing indirect cost recoveries on various federal grants supporting personnel expenditures, increase by $17,844, or 2.0 percent. The increase in general revenues in the current year is largely driven by the addition of two key leadership positions in accordance with the priorities of the newly appointed Secretary of Health and Human Services: Deputy Secretary and Administrative and Legal Support Services Administrator. Collectively, these 2.0 FTE present a partial year cost of $179,435, which is offset by downward adjustments of $58,486 to the Office’s base general revenue financing levels. The Governor recommends total expenditures of $16.8 million for the FY 2012 budget of the Executive Office of Health and Human Services. This is comprised of general revenues totaling $9.6 million, federal funds of $6.3 million, and restricted receipts of $904,712. Relative to FY 2011 enacted levels, recommended general revenue financing increases by $6.2 million, or 181.4 percent, while federal financing increases by $3.4 million, or 117.5 percent. Restricted receipts increase by $30,699, or 3.5 percent. The significant increases to both general revenues and federal financing in FY 2012 are largely reflective of a major realignment of the personnel structure of EOHHS in relationship its subsidiary departments (the Departments of Human Services; Behavioral Healthcare, Developmental Disabilities, and Hospitals; Children, Youth and Families; Elderly Affairs; Health; and Veterans’ Affairs). The key component of this effort is the transfer of 80.0 FTE forming the administrative and policymaking staff of the Medical Assistance (Medicaid) program from the Department of Human Services to the Executive Office in FY 2012. In keeping with the EOHHS organizational model set forth by the Secretary, this transition establishes EOHHS as the “Single State Agency” for Medicaid administration within Rhode Island. Also included is a net transfer-out of 6.6 FTE from the Executive Office to other departments under the EOHHS umbrella. These particular FTE are not explicitly affiliated with the administration of the Medical Assistance program, and were transferred in order to rationalize the final FY 2012 human services rosters in concert with actual job specifications. Taken together, these modifications account for $6.1 million, or 99.1 percent, of the increase in general revenue financing recommended for the Executive Office in FY 2012. The Governor recommends staffing authorizations of 77.6 FTE positions in FY 2011, an increase of 2.0 FTE from the enacted FTE ceiling for the aforementioned senior staff positions. For FY 2012, the Governor recommends staffing authorizations of 149.0 FTE, an increase of 73.4 FTE relative to the enacted level. This increase is comprised of (1) the transfer of 80.0 Medicaid FTE into EOHHS and (2) the net withdrawal of 6.6 other FTE (23.0 FTE transferred from and 29.6 FTE remanded to their originating departments) from the Executive Office, inclusive of the two senior management positions added in FY 2011.

60

Human Services

Department of Children, Youth and Families The Governor recommends $230.1 million in the revised FY 2011 Budget for the Department of Children, Youth and Families, including $152.9 million in general revenue, $72.8 million in federal funds, $2.5 million in restricted receipts, and $1.9 million in other funds. The Governor’s revised Budget includes a net decrease of $172,646 in general revenue expenditures, which represents a 0.1 percent decrease from the enacted budget. The enacted FY 2011 budget for the Department of Children, Youth, and Families contained $1.4 million in stimulus funds that had to be restored to general revenues due to a loss in American Recovery and Reinvestment Act funds (ARRA) funds from what was originally anticipated for the human service agencies in the enacted budget. The Department continues to implement its System of Care Transformation, which restructures programs into a more community-based system of support. The goal of the restructuring is to deliver more children’s services in home and community settings, giving the children, guardians, and community the benefit of inclusion in the rehabilitative process, and to allow the development of more natural supports. Phase One of the implementation of these programs began in FY 2009 and is well under way. This Phase was the establishment of Family Care Community Partnerships (FCCP) for families with children and youths who are at risk for Department involvement due to abuse and neglect or serious emotional disturbance (SED) and youth who are returning to the community following a Rhode Island Training School sentence. The Department made outstanding progress in reducing the lengths of stay in some residential programs and reducing the number of children in out-of-home care, which contributed to a general revenue savings of approximately $2.1 million in FY 2011 by implementing a 90 day length of stay policy with the program’s vendors. Other major general revenue changes from the FY 2011 enacted budget include the following:

• an increase in turnover savings of $3.2 million;

• an increase of $1.0 million in overtime in the Juvenile Corrections and Child Welfare programs; and

• an increase of $2.1 million in grants and benefits partially due to delay in the request for proposals for a vendor that would be responsible for building a comprehensive network of accessible formal and informal services and supports.

The Governor’s recommendation includes a total of 691.0 FTE positions for FY 2011, which is consistent with the enacted level. The Governor recommends total expenditures of $210.9 million in FY 2012 for the Department of Children, Youth and Families. This is comprised of $139.4 million in general revenue, $62.9 million in federal funds, $5.6 million in restricted receipts, and $3.1 million in other funds. The recommended FY 2012 general revenue Budget decreases by $13.6 million from the enacted FY 2011 Budget. In FY 2012, the Governor recommends a shift of $7.5 million to general revenues that had previously been ARRA financed expenditures and an additional $3.8 million for base adjustments in the federal match and

61

Human Services

trend growth associated with Medicaid. The Department has been successful in offsetting this shift along with creating other significant savings by continuing to implement Phase Two of the system of care transformation. This phase includes the reprocurement of purchased services and practice improvements that reduce residential placement durations for a general revenue savings of $9.4 million. Other practice improvement savings total $3.0 million in general revenue and consist of establishing uniformity in adoption training, child placement agency rates, and residential rates; changes in investigative criteria; reductions in caseloads; and improvements to Juvenile Corrections clinical services and electronic monitoring program. The Department assumes a savings of $1.1 million in general revenues through increasing the eligibility rates for social security claiming, costs not otherwise matchable (CNOM’s), and Title IV-E funding. Currently, Local Education Authorities are responsible for reimbursement of education expenses for children in purchase of service placements with on-site school programs. The Governor’s recommendation includes a savings of $2.1 million in general revenues by expanding that responsibility for all out-of-home juvenile justice placements, including the Rhode Island Training School, Camp E Huntee, NAFI, ACE and Ocean Tides. In addition, there will be a revenue increase of $169,000 for the institution of a Social Security Administrative fee and a $100,000 fee for departmental clearances. The Department estimates a general revenue savings of $8.5 million prior to the system of care transformation related to out-of-home placement expenditures based on the utilization trends that it has experienced since FY 2008, the proposed changes to investigative criteria for removals, and imitating services to victims of maltreatment only. Included in the FY 2012 recommended Budget is $1.5 million in contract reductions with outside vendors, to be absorbed by the overall network services. The Governor recommends savings of $1.6 million associated with the consolidation of the Training School operations. This initiative would consolidate the girl’s unit into the Youth Development Center (YDC) on Power Road. To accomplish this, the boys would be housed in three of the four existing residential pods. The fourth pod would be used to house female residents. General revenue reductions associated with the Rhode Island Global Consumer Choice Compact Demonstration Waiver for CNOM’s financing are attributed to the diversion of residential services for at-risk youth into a more community-based approach. The department continues to achieve the programmed savings associated with this 2009 initiative in FY 2012. Other major general revenue changes for FY 2012 from the FY 2011 enacted budget include the following:

• an increase in turnover savings of $2.2 million; and

• an increase of $1.1 million in overtime in the Juvenile Corrections and Child Welfare programs. This recommendation includes a total of 662.5 FTE positions in FY 2012, which is 28.5 FTE less than the FY 2011 enacted and revised Budget recommendation. This includes an addition of 2.0 FTE related to the reorganization of the Executive Office of Health and Human Service agencies and an agency-wide reduction of 30.5 funded FTE associated with the initiatives above.

62

Human Services

Department of Elderly Affairs

The Governor recommends a revised budget for FY 2010 of $32.2 million for the Department of Elderly Affairs, comprised of $9.6 million from general revenues, $21.8 million from federal funds and $745,091 from restricted receipts. This revised level is $5.5 million more than the enacted FY 2010 budget and consists of $452,360 less general revenues, $5.9 million more federal funds and $69,160 more restricted receipts. The decrease in general revenue expenditures compared to the FY 2011 authorized level is due primarily to the rebasing of Medicaid financing participation rates, which was on average 2.58675 percent less than the state FY 2011 enacted participation rate, which yields less general revenue commitment of $527,671. For federal funds, the increase is due to additional federal commitment of 1) $2.1 million for Special Programs for the Aging (Title III, Part B – Grants for Supportive Services and Senior Centers) and 2) $2.0 million for Special Programs for the Aging (Title III, Part C – Nutrition Services---all of which were granted by the Administration on Aging (US Department of Health and Human Services).

For FY 2012, the Governor recommends expenditures of $27.5 million, comprised of $9.3 million from general revenues, $17.8 million from federal funds and $397,091 from restricted receipts. This proposed level of spending is $4.7 million less than the level recommended in the Governor’s revised FY 2011 budget and comprises $328,648 less general revenues, $4.1 million less federal funds and $348,000 less restricted receipts. Compared to the FY 2011 authorized expenditure level, it is $773,552 less and comprises $781,008 less general revenues, $1.8 million more federal funds and $278,840 less restricted receipts. The net reduction in general revenue from the FY 2011 enacted level, reflected in the Governor’s FY 2012 recommendation, consists of net cost savings of $477,709 due to an advance drawdown, for cash flow purposes, of Title III funding, which permits the shift of administrative general revenue costs to this federal source coupled with the elimination/repeal of the Rhode Island Pharmaceutical Assistance to the Elderly (RIPAE) program, which contributes a net cost savings of $300,927. Due to the implementation of the federal Patient Protection and Affordable Care Act (PPACA), the Governor proposes to discontinue the Rhode Island Pharmaceutical Assistance to the Elderly (RIPAE) program effective July 1, 2011. This is in consideration of one of the provisions of PPACA that became effective on September 23, 2010 and allowed for the payment of a $250 rebate to individuals affected by the Medicare Part D coverage gap, 50% of which is expected to be eliminated in calendar year 2011 and by 2020, to be completely eliminated. The RIPAE program, since its inception a number of years ago, has provided a prescription drug benefit for over 18,000 Rhode Islanders 65 years old or older and recipients of Social Security Disability Income who are 55 years old or older. For federal funds expenditures, the net increase is due to additional federal commitment of 1) $1.5 million for Special Programs for the Aging (Title III, Part B – Grants for Supportive Services and Senior Centers), 2) $210,858 for Special Programs for the Aging (Title III, Part C – Nutrition Services) and 3) $185,636 for Special Programs for the Aging Title IV and Title II – Discretionary Projects)---all of which were granted by the Administration on Aging (US Department of Health and Human Services). For restricted receipts expenditures, the decrease, compared to the FY 2011 enacted level, is due to the elimination/repeal of the RIPAE program, which is financed in part by rebates from participating pharmaceutical concerns. The Governor recommends an FTE positions ceiling of 31.0 FTE positions in the FY 2011 revised budget and 32.0 FTE positions in the FY 2012 budget. The net increase of 1.0 FTE position results from a staffing

63

Human Services

reorganization between the department and Executive Office of Health and Human Services which includes the transfer out of an Associate Director (Gr. 141) and transfers in of a Fiscal Management Officer (Gr. 326) and Chief, Program Development Officer (Gr. 134).

Department of Health

The Governor recommends total expenditures of $156.9 million in the FY 2011 revised budget, including $28.3 million from general revenue, $102.6 million from federal funds, and $25.9 million from restricted receipts and $116,200 from other funds. This represents a net increase of $40.7 million from FY 2011 enacted levels, including $697,673 more general revenue, $39.3 million more federal funds, $786,731 more restricted receipts and $63,641 less other funds. The increase in general revenue expenditures from FY 2011 enacted level is due primarily to the purchase of additional formulary for participants in the AIDS Drug Assistance Program (ADAP) necessitated by increases in the costs of formulary and caseloads, the incremental benefit expenditure of which is $562,196. On the other hand, the increase in federal funds expenditures over the levels authorized in the FY 2011 Budget Act is due to the following: 1) Public Health Emergency Preparedness funding of $2.3 million from the Centers for Disease Control and Prevention (US Department of Health & Human Services) to support the National Response Plan and National Incident Management System; 2) National Bioterrorism and Hospital Preparedness funding from the Office of the Secretary of the US Department of Health & Human Services to have hospitals and other health care delivery systems ready for victims of terrorism and other public health emergencies; 3) restoration and transfer of the Special Supplemental Nutrition Program for Women, Infants and Children, which added $19.5 million in additional administrative and benefits expenditures; 4) donated vaccines valued at $10.1 million from the Centers for Disease Control and Prevention (US DHHS) under its Immunization Grants program to immunize individuals against vaccine-preventable diseases; and 5) additional funding of $1.7 million from the Health Resources and Services Administration (US DHHS) under its Maternal and Child Health Service Block Grant to States program. Finally the increase in restricted receipts expenditures is due to additional financial resources derived from internal department assessments of federal grants it administers, which is expected to generate additional revenues and expenditures of $410,031 in addition to $177,141 in additional costs financed by unspent cash resources of $385,818 from fee revenues generated from the regulation of radioactive materials. For FY 2012, the Governor recommends total expenditures of $151.4 million for the Department of Health. This includes $26.7 million from general revenues, $98.0 million from federal funds, $26.7 million from restricted receipts and $63,400 from other funds. This level of funding is $35.3 million or 30.4 percent more than the level authorized in the FY 2011 enacted budget. This increased level of funding consists of $876,659 less general revenues, $34.7 million more federal funds, $1.6 million more restricted receipts and $116,441 less other funds. Compared to FY 2011 revised funding levels, the FY 2012 recommendation by the Governor from all sources is $5.4 million less, consisting of $1.6 million less general revenues, $4.6 million less federal funds, $801,055 more restricted receipts, and $52,800 less other funds. Compared to enacted FY 2011 budget, the decrease in general revenue expenditures is due primarily to a budget planning process initiated by the Executive Office of Health and Human Services, which recognized, after a month’s long deliberation, the following cost savings measures within the Department of Health: 1) reduction in the scope of required examinations by the State Medical Examiner’s program; 2) elimination of the Certificate of Need (CON) process; and 3) elimination of all state funds, except those required as state match, for predominantly federally funded programs. Combined, these initiatives are projected to save approximately $3.2 million.

64

Human Services

The Governor also proposes to transfer the general revenue funding of $775,000 for the Rhode Island State Crime Laboratory to Public Higher Education (University of Rhode Island) effective July 1, 2011. General revenue cost savings are offset by additional outlay of $1.2 million for the purchase of formulary benefiting the AIDS Drug Assistance Program due to anticipated price increases in its costs and program caseloads. For federal funds expenditures, the increase over the levels authorized in the FY 2011 Budget Act is due primarily to the following additional funding: 1) National Bioterrorism and Hospital Preparedness of $1.4 million expected from the Office of the Secretary of the US Department of Health & Human Services for hospitals and other health care delivery systems readiness for victims of terrorism and other public health emergencies; 2) restoration and transfer of the Special Supplemental Nutrition Program, which adds $19.6 million in additional administrative and benefits expenditures; 3) anticipated continuation of donated vaccines valued at $10.2 million from the Centers for Disease Control and Prevention (US DHHS) under its Immunization Grants program to immunize individuals against vaccine-preventable diseases; and 4) continuation of funding of $1.3 million expected from the Health Resources and Services Administration (US DHHS) under its Maternal and Child Health Service Block Grant to States program. For restricted receipts expenditures, the increase in the Governor’s FY 2012 recommendation over the level authorized in the FY 2011 enacted budget consists of: 1) FTE positions program expansion in Central Management, netting a personal service cost increase of $996,870, coupled with a similar increase in Environmental and Health Services Regulations of $322,116 for the shift of two FTE positions from general revenue to restricted receipts (Managed Care Regulation) due to the elimination of activities and functions related to the certificate of need program. The increase in this source is also attributed to anticipated increased cost of $244,203 related to the licensing and regulation of radioactive materials. The Governor’s revised FY 2011 full time equivalent (FTE) positions recommendation is 468.7 FTE positions or 58.0 full time equivalent (FTE) positions more than the ceiling authorized in the FY 2011 enacted budget. The majority of the financing for the related personal services costs attributed to this FTE positions program increase department-wide is financed from non-general sources, including federal ARRA and non-ARRA grants as well restricted receipts. For FY 2012, the Governor recommends 473.3 FTE positions or 62.6 FTE positions more than the original ceiling authorized for FY 2011 and 4.6 FTE positions more than the level recommended in the Governor’s FY 2011 revised budget. FY 2012 increase over the FY 2011 revised ceiling of 4.6 FTE positions is due to staffing re-organization between the department and the Executive Office of Health & Human Services, which resulted to the transfer of 4.6 FTE financial and fiscal positions from the EOHHS.

Department of Human Services The Governor recommends total expenditures of $2.223 billion for the revised FY 2011 budget of the Department of Human Services (DHS). This is comprised of general revenues totaling $736.6 million, federal funds of $1.470 billion, restricted receipts of $10.6 million, and other fund expenditures of $5.0 million. Relative to FY 2011 enacted levels, recommended general revenue financing increases by $21.2 million, or 3.0 percent, while federal financing decreases by $85.8 million, or 5.5 percent. The additional general revenue in the revised budget is largely driven by a $17.4 million increase in planned expenditures for the Medical Assistance (Medicaid) program, reflecting the combined result of estimates adopted at the November 2010 Caseload Estimating Conference (CEC) and certain initiatives set forth in the Department’s FY 2011 constrained budget. Compounding the general revenue increase within

65

Human Services

Medical Assistance were upward revisions to the Supplemental Security Income program ($1.3 million) and the Child Care Assistance Program ($2.3 million), each reflecting the November 2010 Caseload Estimating Conference results. With respect to Medicaid expenditures, the Governor recommends FY 2011 revised general revenue financing commensurate with the Federal Medical Assistance Percentage (FMAP), as enhanced by the provisions of the American Recovery and Reinvestment Act (ARRA) and Public Law 111-226 (The Education Jobs and Medicaid Assistance Act). These enhancements increase the prevailing FMAP from a base level of 52.89 (52.97) percent to an enhanced level of approximately 62.26 (59.52) percent in FY (FFY) 2011. Note that original FY 2011 appropriations for Medicaid were finalized prior to the passage of Public Law 111-226 (August 2010), which extended the ARRA-based FMAP enhancement to the final two quarters of the state fiscal year, but at lower rate than contemplated in the enacted budget. Although this discrepancy was rectified as part of the November CEC process, the correction accounts for the entirety of the increased FY 2011 general revenue requirement for the MA program. Within the FY 2011 revised budget, federal financial participation in Rhode Island’s Medical Assistance program totals $977.0 million, consisting of $133.0 million in ARRA-enhanced FMAP funding. The November 2010 Caseload Estimating Conference adopted an additional $18.8 million in general revenues for the Medical Assistance program and $3.6 million in additional financing for programs of cash assistance in FY 2011. Where applicable, the following expenditure changes to these programs are incremental to those adopted by the Conferees. In light of the imminent loss of federal stimulus financing in FY 2012, and as part of a recent reassessment of the budgetary priorities of all departments under the auspices of the Executive Office of Health and Human Services, the Governor recommends multiple efforts toward retrenchment throughout the EOHHS spectrum. Due to its predominance in the Department’s program budget structure, the majority of these initiatives in DHS concern the Medicaid program. For FY 2011, these include the following (with associated general revenue savings displayed):

• A reduction to non-emergency transportation rates, including the mileage rate paid for wheelchair vans from $1.75 per mile to $.51 per mile coupled with a new flat rate for non-wheelchair van transportation at $22 per trip, with no additional mileage surcharge; ($714,511).

• A partial replacement of financing provided under the CNOM (see below) for Early Intervention with IDEA Part C (100 percent) federal funds; ($706,725).

In FY 2011, further adjustments to general revenues are witnessed throughout the Department’s five administrative programs, yielding net additional general revenues of $248,773. Salient among these is an increase of $541,514 to finance the Department’s assumption of administrative responsibility for the State Supplemental Payments (SSPs) to beneficiaries of the federal Supplemental Security Income (SSI) program, effective January 1, 2011. Specifically, these general revenues will support 4.0 additional FTE, up-front and recurring InRhodes system programming costs, transaction costs, banking costs, postage, and other miscellaneous operating expenses. Pursuant to Article 3 of the FY 2011 Appropriations Act, the Department now processes the disbursement of SSPs and has also assumed control of eligibility determination for the small subset of SSP recipients who receive no federal SSI payment. These functions were formerly provided by the U.S. Social Security Administration, which charged the State a monthly fee per transaction. Significant current year expenditure plan adjustments are also recommended for contracted services within the Division of Veteran’s Affairs, primarily for nursing pool services ($442,450), as well as in the Health Care Quality, Financing, and Purchasing Program (HCQFP) for

66

Human Services

technical support of the Medical Assistance program ($167,160). The Governor’s FY 2011 revised budget for the Department maintains general revenue savings from Costs Not Otherwise Matchable, or “CNOM” items that were enacted as part of the original FY 2011 budget. These are formerly State-only programs that became eligible for federal financial participation under the provisions of the Global Consumer Choice Compact Section 1115 Demonstration (i.e. the “Global Waiver”). Note that a “CNOM” does not entail systemic savings, but rather a zero-sum shift of cost between sources of funding, resulting in general revenue cost-avoidance in the following CNOM areas: General Public Assistance (Medical), $819,718; Early Intervention, $1.3 million; Home Modification, $105,770; Personal Care Attendants, $187,797; Social Services for the Blind, $146,129; the RIDE Transportation Program, $196,601; and Community Health Centers, $634,620. The Department will continue the operation of these “Costs Not Otherwise Matchable” initiatives in FY 2012. The Governor recommends total expenditures of $2.240 billion for the FY 2012 budget of the Department of Human Services. This is comprised of general revenues totaling $864.1 million, federal funds of $1.360 billion, restricted receipts of $11.9 million, and other fund expenditures of $4.5 million. Relative to FY 2011 enacted levels, recommended general revenue financing increases by $148.8 million, or 20.8 percent, while federal financing decreases by $196.7 million, or 12.6 percent. The significant general revenue increase in the FY 2012 budget is largely driven by a $171.2 million increase in planned (general revenue) expenditures for the Medical Assistance (Medicaid) program, reflecting the combined result of estimates adopted at the November 2010 Caseload Estimating Conference (CEC) tempered by a slate of newly developed savings initiatives for FY 2012 (discussed below). It should be noted that the establishment of the Department of Veterans’ Affairs as of July 1, 2011 entails the withdrawal of all FY 2012 financing for the DHS Division of Veterans’ Affairs, thus suppressing the overall increase in general revenues by $19.0 million. Although the enhanced FMAP provisions of both the American Recovery and Reinvestment Act and Public Law 111-226 avail the Department of significant fiscal relief in FY 2011, these enhancements will expire on June 30, 2011. This gives rise to the so-called FY 2012 “FMAP cliff”, requiring appropriations of state funds to replace federal stimulus funds that are no longer authorized in federal law. General revenues for the Medicaid program adopted at the November 2010 CEC, which incorporated the expiration of the ARRA-enhanced FMAP in FY 2012, were $191.6 million above the FY 2011 enacted level. The magnitude of the “FMAP cliff” is starkly illustrated by the fact that all-funds Medicaid expenditures adopted at the November 2010 CEC were $55.9 million above the FY 2011 enacted budget, less than a third of the general revenue increase. Commencing on July 1, 2011, the FMAP reverts to a base level of 52.97 for the first quarter of FY 2012, followed by a decrease to 52.12 on October 1, 2011 for the remainder of the fiscal year. The November 2010 Caseload Estimating Conference adopted an additional $191.6 million in general revenues for the Medical Assistance program and $1.6 million in additional financing for programs of cash assistance in FY 2012. Where applicable, the following expenditure changes to these programs are incremental to those adopted by the Conferees. As in prior years, the Department has identified multiple opportunities for reform within its Medicaid program, many of which will provide significant budgetary relief in FY 2012 and beyond. Again, these initiatives were formulated during an EOHHS-wide reappraisal of the budgetary priorities of all human services departments, and can generally be categorized either as systemic changes to models of service delivery or reformation of prevailing provider rate structures. Specifically, the Governor recommends

67

Human Services

that the Department, under the guidance of the Executive Office, pursue the following major savings initiatives within the DHS Medical Assistance program in FY 2012:

• Nursing Home Rate Reform, general revenue savings of $6.1 million: Rhode Island’s Medical Assistance program currently reimburses nursing homes through the principles of reimbursement payment methodology which is based on each nursing home’s cost. Switching to a price-based methodology will allow the department to save in administrative rate-setting costs. The Department also seeks to reduce rates through a new payment methodology that reimburses nursing homes appropriately based on the needs of Medicaid beneficiaries.

• Outpatient Hospital Rate Reform for Medicaid Managed Care, general revenue savings of $2.7

million: RIGL 40-8-13.4 currently freezes outpatient Medicaid managed care payment rates until December 31, 2011. This proposal would limit subsequent rate increases to no greater than the trend established by the Centers for Medicare and Medicaid Services (CMS) Outpatient Prospective Payment System (OPPS) input price index.

• Health Homes Phase I – CEDARR, general revenue savings of $1.3 million: This initiative would

allow Rhode Island to take advantage of a “Health Home” initiative offered under the Affordable Care Act and receive an enhanced (90 percent) FMAP rate for a set of services that are defined in the Act as a “Health Home”. The department will implement the Health Home initiative in several phases, beginning in September 2011 with the population of children receiving services from CEDARR centers.

• Children’s Health Account Enhancements, general revenue savings of $4.2 million: The

Governor recommends a $4.2 million enhancement of the restricted revenues generated by Children’s Health Account assessments. This will be achieved through both an increase in the maximum “per child per service” assessment level from $6,000 to $7,500 and an expansion of the definition of countable program spending. Children’s Health Account receipts offset expenditures of general revenues on a dollar-for-dollar basis within the Medical Assistance program.

• Money Follows the Person Rebalancing Demonstration grants, general revenue savings of $2.5

million: In February 2011, Rhode Island was approved to utilize new federal grant monies to balance long-term care systems and help Medicaid enrollees transition from a consecutive 90 day stay in a qualified institution to the community. Under this program, certain administrative costs are matched with 100 percent federal funds. Specified home and community-based services (HCBS) will receive a 76 percent federal match.

• Non-Emergency Transportation Rate Reform, general revenue savings of $2.2 million:

Commencing in FY 2011 (see above), the mileage rate paid for wheelchair vans will be reduced from $1.75 per mile to $.51 per mile coupled with a new flat rate for non-wheelchair van transportation at $22 per trip, with no additional mileage surcharge.

The Governor’s FY 2012 recommendations for the programs of cash assistance administered by the Department of Human Services are as follows:

• Rhode Island Works (formerly the Family Independence Program) and Subsidized Child Care: Total Financing of $89.4 million, consisting of $10.6 million in general revenues, reflecting caseloads as adopted by the November 2010 Consensus Caseload Estimating Conference.

68

Human Services

• Supplemental Security Income Program (SSI): Total financing of $18.9 million, consisting

entirely of general revenues and reflecting caseloads as adopted by the November 2010 Consensus Caseload Estimating Conference.

• General Public Assistance (GPA): Bridge Program: $838,680 in general revenues, consistent

with adopted caseload levels. Burials: $620,000 in general revenues, consistent with adopted caseload levels. GPA Medical: $858,060 in general revenues, consistent with adopted caseload levels. GPA Hardship Contingency Fund: $420,000 in general revenues, consistent with the FY 2012 Appropriations Act.

The Governor also recommends the Department maximize its usage of allowable federal administrative expenses under the TANF block grant. Accordingly, in FY 2012 a portion of the grant will be utilized to support an additional $1.6 million in contracts and administrative expenditures for the Rhode Island Works Program. As a substitution of federal funds for general revenues, there is no impact on service levels due to this transfer. As detailed in this section under the Executive Office of Health and Human Services (EOHHS), the Governor recommends a significant restructuring of personnel within the Division of Health Care Quality, Financing, and Purchasing (HCQFP). This Division is the administrative, contracting, and policymaking branch of the Department’s Medical Assistance (Medicaid) program. In FY 2012, 81.0 FTE will be transferred from the HCQFP roster to that of the Executive Office, prompting the withdrawal of $5.5 million in general revenues from the Division’s budget. Other components of the Division remain financed at current service levels, but with an upward adjustment to contract services of $0.8 million for the maintenance of the current Medicaid Management Information Systems (MMIS) “fiscal agent” contract and for MMIS system reprogramming activities during the phase-in of the new MMIS contract. The Governor recommends staffing authorizations of 674.0 FTE positions in FY 2012, a decrease of 314.2 FTE compared to the FY 2011 revised level of 988.2. This decrease consists of three distinct components: (1) the removal of 4.0 FTE associated with the administration of the Jobs Now Rhode Island program, discontinued as of September, 2010; (2) the withdrawal of all 229.2 FTE within the Division of Veterans’ Affairs; and (3) the transfer of 81.0 FTE from HCQFP to the Executive Office of Health and Human Services for administration and oversight of the Medical Assistance program.

Department of Behavioral Healthcare, Developmental Disabilities, and Hospitals The Governor’s revised FY 2011 budget for the Department of Behavioral Healthcare, Developments Disabilities, and Hospitals totals $455.3 million, including $170.9 million in general revenue, $264.4 million in federal funds, $8.0 million in restricted receipts, and $11.9 million in other funds. On an all funds basis, the $455.3 million revised budget is $8.5 million more than the FY 2011 enacted budget of $446.8 million, consisting of the following net changes: an increase of $7.2 million in general revenue, increase of $4.5 million in federal funds, decrease of $594,762 million in other funds, and decrease of $2.6 million in restricted receipts. The enacted FY 2011 budget for the Department of Behavioral Healthcare, Developmental Disabilities, and Hospitals contained $7.5 million in stimulus funds that had to be restored to general revenues due to a loss in American Recovery and Reinvestment Act funds (ARRA) funds from what was originally anticipated for the human service agencies in the enacted budget.

69

Human Services

Department-wide, the Governor’s recommendation includes an additional $505,214 in general revenues from the enacted level for salaries and benefits due to the agency not achieving turnover rates as anticipated in the enacted budget. Overtime expenditures also increased $3.2 million, mostly in the Hospital and Community Rehabilitation Services program, due to high vacancy rates in this program. There is a decrease of $1.6 million in operating costs at the hospitals, which is the result of savings initiatives implemented in pharmaceuticals and medical supplies. For FY 2011, the Governor recommends an authorized FTE level of 1,372.2 FTE positions, which is consistent with the FY 2011 enacted budget. The Governor’s FY 2012 recommendation totals $442.0 million, including $190.5 million from general revenue, $220.0 million from federal funds, $8.0 million from restricted receipts, and $23.4 million from other funds. The general revenue portion of the budget reflects an increase of $26.8 million from the FY 2011 enacted budget. There is a shift of $41.4 million in FY 2012 from stimulus funds to general revenues and an increase of $3.2 million related to base adjustments in the federal match and trend growth associated with Medicaid. This total increase to general revenue funds (including personnel adjustments) added to the FY 2011 enacted budget of $163.7 million brings the current service level for FY 2012 for the Department to $210.4 million. The Department has been successful in offsetting a portion of this shift to general revenue by implementing significant savings associated with program changes that are explained below. The Governor’s recommendation for the Department of Behavioral Healthcare, Developmental Disabilities, and Hospitals for FY 2012 includes a savings of $13.4 million in general revenue for Home Health funding. This initiative allows the Department to utilize an enhanced rate in federal funding for individuals who meet the Home Health criteria and receive services through a designated Home Health provider(eligible providers include mental health centers, physician and clinical practices; and other types of health organizations). Eligibility criteria for this program includes individuals who meet one of the following criteria: 1) have at least two chronic conditions; 2) have one chronic condition and are at risk for another; 3) or have one serious and persistent mental health condition. Project Sustainability is the administration of a nationally recognized validated assessment tool, the Supports Intensity Scale (SIS), to the entire population of consumers served by the system. The development and implementation of a new rate and payment methodology applied to all service providers (and replacing the several different methods of payment and rate development currently in use) will increase transparency and consistency across the system. The result of these changes will be a system that is more easily described and understood and a rational realignment of resources within the system, while maintaining the services and supports that consumers require, with application of consistent standards and payments across the system. Throughout calendar year 2010, the Department of Behavioral Health, Developmental Disabilities, and Hospitals had worked with providers, families and advocates, and other state agencies to define and implement this assessment tool, services, and rates. It is anticipated that as the new assessment tool is implemented, assessment data will be compared to utilization data and resource allocations will be refined

70

Human Services

and rates will be adjusted as needed creating a general revenue savings of $2.2 million in FY 2012. The Governor recommends a reduction of $1.5 million from general revenues for overtime expenditures at the Eleanor Slater Hospital. The Department plans to fill vacant positions at the funded level, which, in turn, will reduce the expenditures of paying individuals at overtime rates. Other reductions recommended by the Governor in FY 2012 are listed below:

- a general revenue decrease of $875,000 for FY 2012, which is related to the closure of six residences and the reduction of utilization of clinics and contract services in the RICLAS system;

- a reduction of $50,000 for changes to behavioral health outpatient services and $600,000 by

increases to eligibility requirements in the CMAP program;

- a decrease of $733,311 by reducing funding for adolescent residential substance abuse treatment and requiring that providers seek funding through third party payers; and

- a reduction of $1.0 million by reducing financing for substance abuse treatment programs.

For FY 2012, the Governor recommends an authorized FTE level of 1,376.2 positions, which is 4.0 FTE more than the FY 2011 enacted and revised budgets. This increase is related to the reorganization of FTE within the Executive Office of Health and Human Service agencies.

Department of Veterans’ Affairs Chapter 233 of the Public Laws of 2009 set forth Chapter 152 of Title 42 of the General Laws, repealing the statutory authority for the DHS Division of Veterans’ Affairs and establishing a new department of state government under the auspices of the Executive Office of Health and Human Services: the Department of Veterans’ Affairs (DVA). All powers and duties with respect to the Division’s operations were transferred from the Director of Human Services to the Director of Veterans’ Affairs, who is to be an honorably discharged war veteran appointed by the Governor with the advise and consent of the Senate. The Director, in turn, will appoint administrators to both the Veterans’ Home and the Veterans’ Memorial Cemetery, both of whom shall also be honorably discharged veterans of the U.S. armed forces. Encompassing the Rhode Island Veterans’ Home, the Office of Veterans’ Affairs, and the Rhode Island Veterans’ Memorial Cemetery, the Department of Veterans’ Affairs provides social casework, nursing care, medical, and rehabilitative services to eligible veterans residing in Rhode Island. The Governor recommends total expenditures of $28.7 million for the FY 2012 budget of the Department of Veterans’ Affairs. This is comprised of general revenues totaling $19.0 million, federal funds of $8.0 million, and restricted receipts of $1.6 million. The basic premise of this recommendation is to accommodate the FY 2012 funding requirements of the three components of the former Division. However, FY 2012 financing levels for DVA also reflect two distinct programmatic changes that will alter both the personnel structure of the former Division as well as the operations of the Rhode Island Veterans’ Home and the Office of Veterans’ Affairs. Specifically, the Governor recommends additional general revenues of $482,642 for 5.0 new FTE to appropriately staff the new Department pursuant to RIGL 42-152: the Director of Veterans’ Affairs plus four new positions designed to augment service capacity at the Office of Veterans’ Affairs. Also recommended for FY 2012 is a dual initiative that will consolidate nursing operations at the Veterans’

71

Human Services

Home while concurrently planning for a 54-patient increase in the resident census. Commencing in early FY 2012, the Veterans’ Home will consolidate from seven to five nursing units, yielding general revenue savings in both overtime expense ($1.0 million) and pool nursing contracts ($1.1 million). The second phase of this initiative, commencing in FY 2013, entails increasing the average monthly resident census to approximately 245 veterans through the elimination of the Veterans’ Home admission waiting list. To adequately prepare to meet the nursing care requirements of these new residents, additional clinical staff (35.0 FTE) will be hired during the final four months of FY 2012 at a total cost of $679,880. In FY 2013, expenditures incurred for heightened staffing levels at the Home will be partially offset by a greater leveraging of federal “per diem” reimbursements from the U.S. Veterans’ Administration. To further support the attendant costs of the Department’s operations and capital improvement plan, the Governor recommends an increase to the monthly maintenance fee charged to residents of the Veterans’ Home. Currently, residents are assessed 80 percent of net income, defined as gross income less: (1) applicable state and federal taxes, (2) a $150 monthly disregard, (3) any amount received as compensation for certain war-related injuries, and (4) any support paid by the resident for permanently blind or totally disabled relatives. The Governor recommends maintaining the definition of net income as it exists in current statute (RIGL 30-24-10) and raising the rate of assessment from 80 percent to 100 percent of resident net income. Per current law, the disposition of additional revenues generated by this fee increase (approximately $1.0 million in FY 2012) will be apportioned between State general revenues (80 percent) and the Veterans’ Home restricted receipt account (20 percent). The Governor recommends staffing authorizations of 268.2 FTE in FY 2012, inclusive of the 40.0 FTE expansion described above. One FTE position appearing on the FY 2011 revised roster of the former Division, Associate Director of Veterans’ Affairs, is not recommended for FY 2012.

Governor’s Commission on Disabilities The Governor recommends revised expenditures of $818,629 for FY 2011 for the Commission on Disabilities. This consists of $363,308 in general revenue, $196,213 in federal funds, $250,000 from the Rhode Island Capital Plan Fund, and $9,108 in restricted receipts. The revised funding level is $5,824 less than the FY 2011 enacted level, and consists of a general revenue decrease of $3,921, a federal funds increase of $2,615 and a restricted receipts decrease of $4,518. The financing recommendation for the Rhode Island Capital Plan Fund is at the enacted level of $250,000. Savings of $3,502 in personnel is related to four pay reduction days. Reduction of $7,671 is related to a shift from micro grants awarded to businesses, to creation of an on-line search engine that will assist disabled-owned businesses in improving their ability to win government contracts. The Governor recommends total expenditures of $829,892 in FY 2012, including $388,786 in general revenue, $181,842 in federal funds, $9,264 in restricted receipts, and $250,000 from the Rhode Island Capital Plan Fund. The recommended general revenue funding in FY 2012 is $21,557 more than the FY 2011 enacted level. Personnel increases are the result of a 3.0 percent COLA adjustment effective June 19, 2011; medical benefits inflation; increase to the retirement contribution; and increase to the retiree health insurance rate. The recommended FTE ceiling for FY 2011 and FY 2012 is 4.0 FTE positions, which is the same as the enacted level.

72

Human Services

Commission on the Deaf and Hard of Hearing The Governor’s revised FY 2011 budget for the Commission on the Deaf and Hard of Hearing is $364,802, consisting solely of general revenues to finance the Commission's personnel, operating, and interpreter referral services. This represents an overall increase of $1,978, or 0.55 percent, from the FY 2011 enacted budget. This revision is fully attributable to two distinct factors: (1) an upward adjustment of $2,928 for personnel financing, reflecting updated salary/wage data and (2) a reduction of $950 for operating expenses to comport with projected spending trends within this category. For FY 2012, the Governor recommends $387,985 in general revenues, which again provides the resources necessary to support the Commission’s current operations. This represents an increase of $25,161, or 6.93 percent, from the FY 2011 enacted level of $362,824. This recommendation is consistent with that of the FY 2011 revised budget, but further includes statewide medical benefit savings (relative to original FY 2012 working rates) of $2,289. A statewide increase in the retiree health rate, resulting from an updated actuarial valuation for OPEB, is likewise recognized in the amount of $241. Staffing authorizations for the Commission remain unchanged at 3.0 FTE positions.

Office of the Mental Health Advocate The Governor recommends revised FY 2011 general revenue expenditures of $438,733 for the Office of the Mental Health Advocate, a decrease of $2,217 from the enacted level of $440,950. The decrease includes a reduction of $373 in personnel expenses, $450 in contracted professional services, and $1,394 in operating expenditures. The Governor recommends total FY 2012 general revenue expenditures of $468,718, reflecting full funding for agency current services and an increase of $27,768 over the enacted FY 2011 budget. The general revenue increase compared to the FY 2011 enacted budget includes $27,045 in statewide adjustments and $6,591 for other salary adjustments, which were slightly offset by reductions of $2,700 in contract services and $3,169 for operating expenditures The Governor recommends the enacted staffing authorization of 3.7 FTE positions for both FY 2011 and FY 2012.

Office of the Child Advocate The Governor’s revised FY 2011 budget for the Office of the Child Advocate is $602,749, including $556,047 in general revenue and $46,702 in federal funds. The general revenue appropriation in the revised FY 2011 budget is $12,225 more than the enacted budget of $543,822. This increase includes an additional $16,309 for personnel expenses, which were slightly offset by a decrease of $4,084 in operating expenses. For FY 2012, the Governor recommends total expenditures of $652,432, including $603,384 in general revenue and $49,048 in federal funds. The general revenue increase of $59,562 compared to the FY 2011 enacted budget includes additional personnel expenses related to a 3.0 percent cost of living increase and other benefit adjustments. Personnel increases were slightly offset by a reduction of $4,084 in operating expenses. The Governor recommends an authorized FTE level of 5.8 positions in FY 2011 and FY 2012, which is consistent with the FY 2011 enacted budget.

73


74

Education

Education Summary

The Education function of state government includes services provided by the Department of Elementary and Secondary Education, Public Higher Education, the Rhode Island State Council on the Arts, the Rhode Island Atomic Energy Commission, the Rhode Island Higher Education Assistance Authority, the Historical Preservation and Heritage Commission, and the Rhode Island Public Telecommunications Authority. The Governor recommends 3,871.9 FTE positions in FY 2011 and 3,889.4 FTE positions in FY 2012. Two boards govern the major part of Education activities in Rhode Island. The Board of Regents, with the advice of the Commissioner of Education, establishes policy with respect to the operations of the Department of Elementary and Secondary Education, state education aid programs, the Central Falls School District, and the three state schools: the School for the Deaf, the Davies Career and Technical School, and the Metropolitan Career and Technical School. The Board of Governors for Higher Education, with the advice of the Commissioner of Higher Education, establishes policy with respect to operations at the three state institutions of higher education. The FY 2011 revised recommendations for Education agencies total $2.206 billion, or $104.5 million more than enacted appropriations of $2.101 billion. As compared to the enacted budget, general revenue decreases $9.1 million, or .9 percent, federal funds increase $107.7 million or 3.7 percent, restricted receipts decrease $4.9 million or 19.4 percent, and other funds increase $40.3 million, or 5.2 percent. American Recovery and Reinvestment Act of 2009 funding comprises $134.5 million, or 38.7 percent of the federal funds.

How it is Financed

General Revenue48.6%

Restricted Receipts

1.2% Federal Funds

11.9%

Other Funds38.4%


In the Education function of state government, other funds consist of: Rhode Island Capital Plan Funds, Institutional Revenues, Sponsored Research Programs, Scholarships and Fellowships, Auxiliary Enterprises in Public Higher Education, and the Corporation for Public Broadcasting grant to the Rhode Island Telecommunications Authority.

75

Education The Governor recommends total expenditures of $2.17 billion for Education in FY 2012, including $1.054 billion from general revenue, $258.4 million from federal funds, $25.5 million from restricted receipts, and $832.6 million from other funds. American Recovery and Reinvestment Act of 2009 funding comprises $45.3 million, or 17.5 percent of the federal funds.

How it is Spent

Personnel25.5%

Operating Supplies and Expenses

10.0%

Operating Transfers

0.1%

Aid To Local Units Of Government

46.6%

Capital Purchases and Equipment

1.5%

Debt Service1.9%

Assistance, Grants and Benefits

14.3%

Personnel Operating Supplies and Expenses Aid To Local Units Of Government Assistance, Grants and Benefits

Capital Purchases and Equipment Debt Service Operating Transfers

The Governor’s general revenue recommendation of $1.054 billion for Education for FY 2012 is an increase of $22.4 million, or 2.2 percent from FY 2011 enacted levels. Aid to Local Units of Government accounts for 46.6 percent of all education expenditures. State operations expenditures, which include personnel and operating, account for 35.5 percent of total education expenditures. Most of these expenditures occur in Public Higher Education. The remaining 17.9 percent of expenditures occur in grants and benefits and capital outlays.

76

Education Elementary and Secondary Education

The Governor recommends $1.173 billion in revised expenditures from all funds for the Department of Elementary and Secondary Education for FY 2011, an increase of $44.5 million from the enacted level of $1.129 billion. Of this total, $847.4 million is general revenue expenditures, $299.4 million is federal grants, $19.0 million is restricted receipt funds, $7.1 million is Rhode Island Capital Plan Fund (RICAP) funding and $288,624 is other funds expenditures. General revenue expenditures decrease by $8.7 million, federal expenditures increase by $59.4 million, restricted receipt expenditures decrease by $4.9 million, RICAP funds decrease by $1.3 million, and other funds expenditures decrease by $95,000. The Governor’s revised FY 2011 Budget includes a variety of reductions to general revenues. The most significant general revenue declines in the FY 2011 revised Budget occur in two distinct aid programs. A mid-year adjustment to the School Housing Aid program reduces aid by $2.8 million to $68.0 million. This annual adjustment takes into account projects that were not completed in FY 2010 and therefore are not eligible for reimbursement in FY 2011. Further, the state contribution for teachers’ retirement decreases by $5.9 million from the enacted level, reflecting a lower base due to updated FY 2010 closing payroll data along with an estimated two percent growth rate in teacher payroll. General revenue support for the Davies Career and Technical School decreased from the enacted level by $2,080. General revenue support for the Rhode Island School for the Deaf decreases by $118,345. General revenue support for the Metropolitan Career and Technical School and the Central Falls school district each remained at the enacted level of $12.6 million and $41.8 million, respectively. In education aid, general revenue increases by $280,658 from the enacted level for mid-year adjustments to charter school funding, as well as an increase of $30,000 in group home funding to reflect additional beds subject to reimbursement. In the revised FY 2011 Budget, financing of the Administration of the Comprehensive Education Strategy (ACES) was reduced by $846,409. This reduction reflects moving $700,000 for a Pre-K demonstration project from ACES to Education Aid. Additionally, the ACES program reflects $141,572 in personnel savings, $24,000 of savings as the Department’s insurance and annuity obligations for the former Commissioner have ended and $200,000 in the Educator Quality program for services no longer needed while also shifting a Regents Fellow to a Title II grant. Offsetting some of this savings is an increase to the Rhode Island Vision Education and Services Program (RIVESP) of $125,000. This program provides teaching and consultation services to children who are blind or visually impaired, their families and educational staff within the school environment. FY 2011 is the third and final full year of Federal State Fiscal Stabilization Funds, as they will expire on September 30, 2012 per the American Recovery and Reinvestment Act (ARRA). In addition to the $18.6 million originally enacted, an additional $3.5 million in unspent funds has been added to the Governor’s revised FY 2011 Budget and a total of $729,663 has been shifted from the original FY 2011 enacted amount for LEAs to institutions of public higher education, pursuant to the updated calculation mandated in ARRA. Finally, $4.6 million for potential carry-forward dollars were added in FY 2012. The Governor’s Budget also includes additional federal funding from a grant called Race to the Top. As a winner in the Race to the Top competition, Rhode Island has been awarded $75.0 million that will be used over a four year period. As described by the Department of Elementary and Secondary Education, Rhode Island will use Race to the Top funding to realize a single

77

Education powerful vision: an educational system that prepares all Rhode Island students for success in college, careers and life. Over the term of the grant, Rhode Island will realize this vision through five important support systems: Standards and Curriculum, Instructional Improvement Systems, Educator Effectiveness, Human Capital Development, and School Transformation & Innovation. The Governor’s FY 2011 revised Budget allocates $13.3 million while the FY 2012 Budget allocates $22.3 million from this grant. Lastly, the Governor recommends an additional twenty-two (22.0) limited-term FTE positions to be financed under this grant within the ACES program. For Fiscal Year 2012, the Governor recommends $1.139 billion in expenditures from all funds for the Department of Elementary and Secondary Education. Of this total, $869.0 million is from general revenue, $238.1 million is from federal funds, $24.0 million is restricted receipts, $7.2 million is from the Rhode Island Capital Plan Funds, and $183,624 is from other funds. This financing level represents an increase in general revenue expenditures of $12.9 million from the enacted FY 2011 level, a decrease of $1.8 million in federal expenditures, an increase of $108,671 in restricted receipt expenditures, a decrease of $1.2 million in RICAP funds, and a decrease of $200,000 in other funds expenditures. Funding for the Department’s Administration of the Comprehensive Education Strategy (ACES) program decreases by $264,131 in general revenue funding from the enacted FY 2011 level. For the state-supported schools, all of whom except for the School for the Deaf are subject to the funding formula, general revenue funding for the Davies Career & Technical School decreases by $1.0 million from the FY 2011 enacted level. General revenue funding for the School for the Deaf decreases by $75,523. General revenue funding for the Metropolitan Career & Technical School decreases by $1.0 million. General revenue for the Central Falls school District decreases by $3.3 million. The Governor recommends an increase to the Education Aid program in FY 2012 to replace expiring State Fiscal Stabilization Funds, fund year one of the funding formula and to finance selected categorical funds. In order to maintain the commitment to the formula while also closing the deficit, the Governor recommends reducing general revenue aid by $32.3 million, to be replaced by Education Jobs Fund money, and only funding the Transportation and Regional Bonus categorical funds, while delaying the other categorical funds by one year. The State of Rhode Island has been awarded $32.9 million in a federal Education Jobs Fund Bill to retain and rehire school-based personnel in local education agencies (LEAs). $32.3 million or 98.0 percent of these funds will be distributed to LEAs based on their percentages of FY 2011 enacted state aid. The remaining two percent will be set aside for administrative costs and other fees associated with this grant. The money distributed to the LEAs can only be used for compensation costs for school-based personnel. By law, the funds must all be made available to LEAs immediately, who have full discretion as to when to use the funds. Therefore, $27.0 million is reflected in the FY 2011 revised Budget with the remaining $5.9 million allocated towards FY 2012 to reflect the LEAs ability to draw the funds in the current year if they choose. However, the Governor recommends reducing general revenue support to LEAs by $32.3 million in FY 2012 and recommends that LEAs hold off using the $32.3 million from this bill until FY 2012. As of this writing, only $2.5 million of the $32.3 million has been drawn down by LEAs, which suggests that most will be able to do just that. Those LEAs affected under the funding formula include local districts, charter schools, Davies, and the Met. Although the School for the Deaf is not part of the funding formula, it will also be receiving Education Jobs Fund money; therefore, the Governor recommends a matching reduction in general revenue aid.

78

Education The Governor recommends $82.7 million for funding of the Teachers’ Retirement program, or an increase of $7.1 million from the enacted FY 2011 Budget. The State of Rhode Island funds 40.0 percent of the employer’s share of the necessary contribution to the Teacher Retirement System while the municipalities contribute the balance. The employer’s share is determined annually, based on actuarial reports by the State Employees Retirement System and is applied to the covered payroll. The projected increase reflects a 2.0 percent growth in the teacher payroll base along with a rise in the state share from 7.76 percent in FY 2011 to 9.09 percent in FY 2012. Housing Aid increases by $1.7 million to account for projects that are expected to complete in FY 2011, and thus be subject to reimbursement in 2012. This increase also accounts for a rise in the minimum state share ratio. Beginning in Fiscal Year 2012, the minimum state share ratio will increase by 5.0 percent from the current minimum of 30.0 percent until a 40.0 percent state share ratio has been achieved. For the entire Department, which includes the Davies Career & Technical School and the School for the Deaf, the Governor recommends staffing authorizations totaling 348.4 FTE positions in FY 2011 and FY 2012. The recommendation includes an additional twenty-two (22.0) FTE positions, which are limited-term positions in the ACES program to be funded with federal Race to the Top funding. Lastly, the Governor recommends one (1.0) additional FTE position to be financed in general revenue. The FTE position will be involved in the Uniform Chart of Accounts (UCOA) initiative.

Public Higher Education The Governor recommends a revised FY 2011 Budget of $996.1 million for Public Higher Education, including $162.6 million in general revenue, $32.7 million in federal funds, including American Recovery and Reinvestment Act of 2009 funding of $28.1 million, $775.8 million in other funds, $930,000 in restricted receipts, and $24.1 million from the Rhode Island Capital Plan Fund. General revenues decrease $1.0 million from the enacted level, reflecting only savings for debt service adjustments. This level funded Governor recommendation maintains effort for a new federal College Access Challenge Grant of $1.5 million over two fiscal years. The Governor recommends 4,217.1 FTE positions in FY 2011, an increase of 65.0 FTE positions at the Community College, including 3.0 FTE positions for workforce development coordination and 62.0 FTE positions for teaching and student support. For FY 2012, the Governor recommends $995.0 million for Public Higher Education, including $173.4 million in general revenue, $4.6 million in federal funds, $805.6 million in other funds, $941,338 in restricted receipts, and $10.5 million from the Rhode Island Capital Plan Fund. General revenues increase $9.8 million, or 7.3 percent from the FY 2011 enacted level. The Governor recommends a total of 4,234.6 FTE positions, an increase of 17.5 FTE positions for faculty at Rhode Island College. Debt service adjustments save $744,223 and personnel adjustments, including a 3.0 percent cost of living adjustment, add $3.3 million. The Governor’s recommendations also include the transfer of $775,000 for the Crime Laboratory from Department of Health. In order to reverse the trend of reduced funding for Higher Education in recent years due to budget constraints, the Governor recommends an increase of $10.0 million above the enacted FY 2011 level for the higher education system. This increase is slightly offset by statewide savings in health benefit rates and debt service on higher education bonds.

79

Education The budget proposed by the Governor includes total tuition and fee revenue growth of $11.5 million, including $11.4 million at the University, $320,600 less at the College, and $704,567 less at the Community College. The original budget requested by the Board of Governors did not include an increase for undergraduate in-state or out-of-state tuition and fees for FY 2012, but based on the total state support recommended by the Governor, it is likely tuition increases will be required. Any such increases will be determined by the Board at a later date. Pursuant to FY 2007 legislation, both the FY 2011 appropriation and FY 2012 recommended budgets include debt service appropriations within Public Higher Education that were formerly funded under the Department of Administration. In FY 2011, debt service is $18.5 million, a decrease of $1.0 million from enacted levels and in FY 2012, $18.8 million is included, a decrease of $744,223 from all sources. The College Crusade of Rhode Island and other legislative grant awards both in FY 2011 and in FY 2012 are recommended at $1.2 million.

Rhode Island Council on the Arts The Governor’s revised FY 2011 Budget for the Rhode Island Council on the Arts is $3.1 million, including $1.7 million in general revenue, $950,969 in federal funds and $435,000 in other funds. The recommendation includes an increase of $18,940 from the enacted level for general revenue appropriations mostly attributable to an increase for personnel costs of $15,287. This increase primarily reflects updated benefit costs, as well as a salary increase to a part-time Senior Systems Design Programmer in the Film Office from the enacted level. The revised FY 2011 Budget also provides $15,000 to fully fund the former Governor’s official portrait, as required by law, which is an increase of $7,500 from the enacted Budget. Originally, $7,500 was to be encumbered in FY 2010 towards the portrait while the remaining $7,500 would be encumbered in FY 2011. Due to a delay in the process of choosing an artist, no expenditures occurred in FY 2010. Therefore, the entire cost of the portrait of $15,000 is reflected in the FY 2011 revised Budget. For FY 2012, the Governor recommends $3.0 million, including $1.6 million in general revenue, $973,064 in federal funds and $435,000 in other funds. The general revenue decrease from the FY 2011 enacted level is $49,236. The FY 2012 Budget includes a reduction of $100,000 in discretionary grant financing. Partially offsetting this reduction is an increase in personnel costs of $62,111, which includes the three percent cost of living adjustment of $16,871. The Governor recommends 8.6 FTE positions in FY 2011 and FY 2012, which is unchanged from the enacted FY 2011 level.

Rhode Island Atomic Energy Commission The Governor’s revised FY 2011 Budget for the Rhode Island Atomic Energy Commission is $1.47 million, including $861,031 in general revenue, $314,1104 in federal funds, and $297,047 in other funds. The recommendation includes a net decrease of $14,750 to general revenue appropriations, reflecting personnel adjustment savings of $6,812, operational savings of $9,687, and an increase in contract services of $1,749. For FY 2012, the Governor recommends $1.5 million, including $879,592 in general revenue, $324,104 in federal funds, and $307,830 in other funds. The increase of $3,811 in general

80

Education revenue from the FY 2011 enacted Budget recognizes operational savings of $50,535, reflecting current staff personnel costs, and increases of $55,438, including a 3.0 percent cost of living adjustment of $22,821, with net savings from the statewide health and retiree health adjustments of $1,092. The Governor recommends 8.6 FTE positions in both FY 2011 and FY 2012. The Rhode Island Atomic Energy Commission (RIAEC) will continue to operate the state-of-the-art reactor at the Rhode Island Nuclear Science Center (RINSC) for the purposes of research, education and training and environmental monitoring. Moreover, the staff of the RINSC will continue to provide technical assistance to other state agencies, including the Rhode Island Department of Health and the University of Rhode Island. The Governor’s budget will enable the Commission to explore additional commercial uses for the RINSC, including new technology involved in cancer research.

Rhode Island Higher Education Assistance Authority The Governor recommends a revised FY 2011 Budget of $27.5 million, including $7.3 million in general revenue, $13.2 million in federal grants, and $7.0 million in other funds. General revenues increase $596,839 from the enacted level, reflecting reductions of $9,523 for personnel adjustments and capital and an operating increase of $26,362. State needs-based scholarships of $5.9 million increase $580,000 to $6.5 million to provide federal maintenance of effort for a College Access Challenge Grant in the Office of Higher Education. For FY 2012, the Governor recommends $27.4 million, including $6.2 million in general revenue, $13.5 million in federal funds, and $7.7 million in other funds. General revenues decrease $560,243 from the FY 2011 enacted level. Personnel current services adjustments, including a 3.0 percent cost of living adjustment, result in a net increase of $35,460. Statewide adjustments include savings from lower than anticipated health benefit costs, $2,368; and a net increase of $25,362 in operations. State needs-based scholarships of $5.3 million decrease $618,697 from the FY 2011 enacted level. The Governor recommends 41.6 FTE positions in FY 2011 and in FY 2012.

Rhode Island Historical Preservation and Heritage Commission The Governor recommends total expenditures of $2.7 million for the revised FY 2011 Budget for the Rhode Island Historical Preservation and Heritage Commission. This consists of $1.4 million in general revenue, $841,508 in federal funds and $475,552 in restricted receipts. The recommendation reflects a general revenue increase of $53,802 from the enacted level. Additional personnel costs of $44,892 and operating expenses of $11,200 contribute to the majority of this general revenue increase. Maintenance to the Eisenhower House contributed an additional $9,500 to the operating portion of the revised FY 2011 Budget. Lastly, the Commission achieved a small savings of $2,290 within various sections of contracted services. The Governor recommends total financing of $2.8 million for FY 2012, including $1.5 million in general revenue appropriations, $846,195 in federal funds, and $478,181 in restricted receipts. General revenue increases by $152,924 from the enacted FY 2011 level. Additional costs in personnel, $142,874 and operating costs of $11,200 contribute towards this increase. The majority of additional operating costs are recommended to account for an increase in mileage for travel expenses as well as maintenance costs to the Eisenhower House. A small amount of general revenue savings is achieved within contract services to the amount of $1,150.

81

Education The Governor recommends 16.6 FTE positions in FY 2011 and FY 2012, which is unchanged from the enacted FY 2011 level.

Rhode Island Public Telecommunications Authority The Governor recommends total expenditures of $1.6 million for the revised FY 2011 Budget of the Public Telecommunications Authority. This consists of general revenue financing of $979,325 and $646,734 in grant financing from the Corporation for Public Broadcasting (CPB). The recommendation reflects a decrease of $56,642 in general revenue appropriations from the enacted level. This reduction is primarily attributed to a decrease of $55,942 in personnel costs, which include twelve (12) pay reduction days, agreed upon within the Authority’s union contract. Additional savings contributed to a lag period in hiring a new President/CEO in FY 2011. The Governor recommends total financing of $1.8 million for FY 2012, including $1.1 million in general revenue appropriations and $683,212 from the Corporation for Public Broadcasting (CPB) grant. This represents an increase of $61,993 in general revenue from the enacted FY 2011 Budget. The increase is due entirely to an increase in personnel costs of $63,993. The FY 2012 recommendation also reflects savings in operating costs of $2,000 compared to the enacted Budget. The Governor recommends a staffing authorization level of 16.0 FTE positions in FY 2011 and FY 2012, which is unchanged from the enacted FY 2011 level.

82

Public Safety

Public Safety

Summary The quality of life in Rhode Island is enhanced through the administration of a public safety system that provides law enforcement, adjudicates justice, protects life and property, and handles emergencies impacting Rhode Island’s citizens. The six agencies that expend 6.2 percent of the total FY 2012 state Budget from all sources of funds to provide public safety services to the state include: the Department of Corrections; the court system (Attorney General; the Judiciary; and the Office of the Public Defender); the homeland security system (Military Staff, including both the National Guard and the Emergency Management Agency); and the Department of Public Safety (State Police, Capitol Police, E-911, State Fire Marshal); the Rhode Island Justice Commission; and Municipal Police Training Academy. In the FY 2012 budget, the Governor recommends the transfer of the Sheriffs from the Department of Administration to the Department of Public Safety. The FTE recommendation for the FY 2011 revised budget is 3,006.6 FTE positions, an increase of 6.1 FTE position from the enacted level, reflecting new firefighter positions in the Military Staff. The FTE recommendation for FY 2012 is 3,186.6 FTE positions, an increase of 186.1 FTE positions, reflecting both the firefighters and the transfer of 180.0 Sheriff positions. The largest share of funding within the Public Safety function is for the Department of Corrections, representing 40.2 percent of the total. Because the Adult Correctional Institutions, which includes eight secure facilities that operate twenty-four hours per day, the Department must provide continuous supervision of an annual average inmate population of 3,350. Additionally, the Community Corrections subprogram supervises 27,700 community-based offenders per year. The second largest share of the Public Safety budget is for the courts system, at 27.9 percent of the total. This includes 20.6 percent of expenditures for the Judiciary, supporting six courts statewide, and 7.3 percent for the Attorney General and the Office of Public Defender. The Department of Public Safety’s share is 19.2 percent. The Military Staff comprises 12.7 percent of Public Safety expenditures. In the FY 2011 revised budget, the Governor recommends an all-funds budget of $482.5 million for public safety programs. Of this amount, $366.7 million is from general revenue, $76.9 million is from federal funds, $12.2 million is from restricted receipts, and $26.8 million is from other funds. All-fund spending increases by $50.7 million, as compared to the enacted budget. There is a $3.8 million all-funds increase in personnel expenditures, a $1.4 million increase in operating expenditures, a $36.5 million increase for grants and benefits and an $8.9 million increase for capital expenditures. Of this increase, the general revenue budget increases by only $3.2 million from the FY 2011 enacted level, with the bulk of the increase ($40.8 million) concentrated in federal grants. All funds funded personnel increases by $3.8 million and reflects the statewide reductions in payroll costs and the adjustment for four pay reduction days. Operating expenditures increase by only $1.4 million due to less than anticipated per diem expenditures for inmates (food, clothing, pharmaceuticals) resulting from the reduced inmate census of 3,350. Grant increases of $36.5 million are concentrated in federal funds, where an increase of $33.8 million reflects additional Emergency Management homeland security and related federal grants, as well an estimated $19.5 million in flood damage reimbursement funds from the Federal Emergency Management Agency for the March/April 2010 flood. The increase in capital funding reflects $6.8 million in additional Rhode Island Capital Plan funding, primarily due to the carry over of unspent FY 2010 funding, for new and existing projects, the retrofit of the Reintegration Center to house female inmates and the Armory of Mounted Commands roof and HVAC project.

83

Public Safety

How it is FinancedState Ge ne ral Re ve nue

84.6%

F eder al Funds9. 4%

O ther 3.5%

Re stric ted Rec eipts2.5%

The Governor recommends a FY 2012 budget of $475.4 million from all funds, a decrease from FY 2011 revised of $7.1 million, but an increase of $43.6 million from the FY 2011 enacted budget. Expenditures of $402.2 million are recommended for general revenue, $38.7 million, or 10.7 percent, more than enacted levels, $16.7 million of which is in the Department of Public Safety due to the Sheriffs transfer. Federal funds of $44.7 million increase by $8.6 million. Decreases are recommended in restricted receipt expenditures ($12.1 million, a $483,000 decrease) and other funds ($16.5 million, a $3.2 million decrease), primarily in the Rhode Island Capital Plan Fund for Public Safety. Categorically, the general revenue increase of $38.7 million is primarily due to a $33.3 million increase in personnel costs for salaries, benefits and contract services. The increase reflects provision for a 3.0 percent cost-of-living adjustment, as well as 180.0 Sheriff positions in Public Safety transferred from Administration. Other categories change relatively little: expenditures for grants and benefits increase by only $3.1 million, while operating expenditures increase by $3.3 million, and capital purchases and equipment expenditures are flat at $958,127. Funding for the Public Safety function is derived mainly from state sources. General Revenue comprises 84.6 percent and 3.5 percent is other funds (primarily from the Rhode Island Capital Plan Fund for construction, repair and rehabilitation projects for Corrections, Military Staff, Judiciary, and State Police facilities). Federal funds are 9.4 percent of the total, and include Emergency Management homeland security expenditures; FEMA flood reimbursements; National Guard Bureau funding; adult education, discharge and reentry services, incarceration of undocumented aliens at Corrections; and Child Support Enforcement in the Judiciary. Restricted receipts account for the remaining 2.5 percent, primarily in the Judiciary.

84

Public Safety

By category of expenditures, state operations, including personnel (77.2 percent, $366.9 million) and other operating costs (8.8 percent, $41.7 million), total $408.6 million, or 86.0 percent of total expenditures, and are financed primarily from general revenues. Assistance, grants and benefits are $51.3 million or 10.8 percent, and are financed from general revenue and federal funds. Capital improvement projects, $15.4 million for 3.2 percent, include the Rhode Island Capital Plan Fund and federal funds.

How it is Spent

Operating8.8%Personne l

77.2%

Grants10.8%

Capi tal3.2%

85

Public Safety

Attorney General The Governor recommends revised FY 2011 appropriations totaling $25.2 million for the Attorney General, including $21.4 million from general revenue, $2.0 million from federal funds, $1.3 million from restricted receipts, and $437,270 from the Rhode Island Capital Plan Fund. This is a general revenue increase of $233,636 or 1.0 percent, from FY 2011 enacted levels. The increase is mostly due to $500,000 for the National Association of Attorney General’s Tobacco Litigation and $44,788 for Transition Costs for the election in November of 2010. The general revenue increase is offset in part due to personnel savings of $266,532. For FY 2012, the Governor recommends total expenditures of $25.3 million, including $22.6 million from general revenue, $1.4 million from federal funds, $1.1 million from restricted receipts, and $250,000 from the Rhode Island Capital Plan Fund. This includes a general revenue increase of $1.4 million or 6.1 percent, from the FY 2011 enacted budget. This includes personnel increases for a 3.0 percent cost of living increase, medical benefits inflation, and retirement. In addition, an increase of $370,000 from the FY 2011 enacted Budget for Tobacco Litigation contributed to the increase. The Governor recommends 231.1 FTE positions in FY 2011 and FY 2012, which represents no change from the enacted FY 2011 level.

Department of Corrections The Governor’s revised FY 2011 budget for the Department of Corrections is $194.0 million. This includes $178.6 million in general revenue, $3.7 million in federal funds, $124,774 in restricted receipts, and $11.6 million in other funds. The FY 2011 revised general revenue budget is $232,164 more than the enacted level of $178.3 million. In addition to current service adjustments, including additional turnover to reflect existing vacancies, the Governor recommends the following statewide adjustments: additional savings in medical benefit costs and savings of $1.3 million (salary only) from four pay reduction days for non-union state employees and some unionized state employees with wage agreements. The Governor recommends the following adjustments to the enacted budget:

• Correctional Officer Training: the Governor recommends funding one class in FY 2011, starting in October 2010, with graduation in January 2011 of 17 correctional officers; $462,886 in general revenue is included in the FY 2011 budget for this purpose.

• Personnel Costs: the Governor recommends $155.4 million in FY 2011 to fund a total of 1,419.0

FTE, the same as the enacted level. Included in this budget is a March 10, 2010 arbitration award to correctional officer personnel. Provisions of this award include an 8.74 percent increase effective June 21, 2009; 3.0 percent COLA increases effective on both June 20, 2010 and June 19, 2011; pay reductions of one day in FY 2009, eight days in FY 2010, and four days in FY 2011; and changes in medical benefit co-shares and plan designs, reflecting a switch from percent of pay to percent of premium. These provisions (at an estimated cost of $7.4 million) are included in the enacted budget. The Governor also recommends an additional $3.3 million to fund an additional provision of the above-discussed arbitrator award: a further increase of 2.95 percent effective in both June 20, 2010 and June 19, 2011, reflecting parity with a prior year award to the Sheriffs.

86

Public Safety

• Inmate Population-Related Overtime Expenditures: the Governor recommends $21.5 million, an additional $2.2 million from the enacted level, to finance supervisory overtime costs at the Department’s eight inmate facilities. Savings projected in the enacted budget have not been achieved. Several housing units were not closed despite the success of the Earned Good Time initiative approved in the 2008 legislative session. This initiative was anticipated to reduce sentenced days for offenders maintaining good behavior and/or completing rehabilitation programs. Although inmate reductions are in part attributable to this initiative, it has been offset by increases in the awaiting trial population, as well as the continued need to staff common areas of each facility. The estimated inmate population in the FY 2011 revised budget is 3,350, a decrease of 102 from the enacted level of 3,452.

• Inmate Population-Related Operating Expenditures: as a result of the above referenced population

reductions the Governor recommends $12.7 million in funding for per diem operating expenses, including linens, inmate clothing, program supplies, janitorial supplies, food, pharmaceutical and medical supplies as well as medical services, a reduction of $1.1 million from the enacted level. Reductions totaling $1.2 million are concentrated in drugs and medical services, with a small increase in other operating expenses, primarily food.

For the FY 2012 budget, the Governor recommends $199.0 million in total expenditures for the Department of Corrections. This consists of $188.1 million in general revenue, $2.9 million in federal funds, and $7.9 million in other funds. The FY 2012 recommended general revenue budget increases by $9.8 million from the FY 2011 enacted level and by $9.6 million from FY 2011 revised budget recommendation. The budget includes major turnover adjustments, as well as total statewide benefit adjustments of $9.0 million for a 3.0 percent COLA and the end of pay reductions, as well as adjustments for other benefit costs. The Governor recommends the following:

• Inmate Population-Related Overtime Expenditures: the Governor recommends $21.9 million on overtime to finance supervisory costs at several housing units, an increase of $700,000 from the enacted budget.

• Inmate population is estimated at 3,416, an increase of 66, or 2.0 percent from the enacted level.

Per diem expenditures of $13.1 million decrease by $649,206 from the enacted budget, including a decrease of $635,250 for medical supplies and pharmaceuticals, a decrease of $385,631 for medical services, and an increase of $371,675 in non-medical costs. The recommended budget increases by $410,565 from the FY 2011 revised recommendation.

• Correctional Officer Training: the Governor recommends funding one class in FY 2012, starting

in the fall of 2011, with graduation in January 2011.

• Weapons Requalification: in FY 2012 the Governor recommends $824,383, ($463,562 in FY 2012) in overtime, military supplies, mileage, and firing range facility rental costs to initiate the weapons requalification process for over 1,000 correctional officers. The process will start in the spring and continue into the summer of FY 2013.

87

Public Safety

• RIBCO Wage Base Adjustments: the Governor recommends continued inclusion of the $7.4 million to finance estimated salary and benefit wage base adjustments for arbitration awarded RIBCO contract awards, as well as the additional $3.5 million for the 2.95 percent parity increase referenced above. .

Federal funds of $3.7 million in FY 2011 and $2.9 million in FY 2012 will finance core personnel through the State Criminal Alien Assistance program ($1.0 million), as well as adult inmate education, AIDS counseling, sex offender assessment, supervision and treatment and reentry services. In addition, the Department has been awarded a total of $588,620 in FY 2011 and $408,000 in FY 2012 in federal stimulus grants from the American Recovery and Reinvestment Act (ARRA). These grants are for programs in inmate education, inmate family reunification, inmate transition through access to employment, and the Adult Drug Court. In order to provide necessary repairs and renovations to the Department’s aging facilities, the Governor recommends $11.6 million in FY 2011 revised and $7.9 million in FY 2012 from the Rhode Island Capital Plan Fund. Project funding includes a total of $6.7 million for both years for various asset protection projects, $427,267 million for roof and infrastructure improvements to the Bernadette Guay Building, and $6.6 million in renovation costs to enable the transfer of women inmates from their current facilities to the now vacant Reintegration Center. This is in addition to the $1.4 million provided in FY 2011 in general revenue for ongoing facility maintenance. The Governor’s recommended budget includes funding for internal service funds accounts that include the following: the Central Distribution Center, which is responsible for the centralized purchase of food staples and other supplies for distribution to other state agencies and Correctional Industries, which employs inmates to manufacture products and provide services to state and other agencies. The total funding (to be paid by state agencies users of the internal service funds’ services) is $13.9 million in FY 2011 and $14.1 million in FY 2012 and includes funding for 30.0 FTE’s The FY 2011 and FY 2012 FTE level for the Department remains the same as the enacted level of 1,419.0.

Judiciary The Governor’s revised FY 2011 Budget for the Judiciary is $99.2 million, including $84.4 million in general revenue, $3.9 million in federal funds, $10.0 million in restricted receipts, and $850,787 in other funds. In relation to the FY 2011 enacted budget, the recommendation is a decrease of $182,827 in general revenue, an increase of $1.6 million in federal funds, an increase of $390,576 in restricted receipts, and an increase of $787 in other funds. The financing supports the six courts that comprise the Judiciary: The Supreme Court; the Superior Court; Family Court; District Court, Workers’ Compensation Court; the Traffic Tribunal, and in addition, the Judicial Tenure and Discipline program. Salary, wages and benefits total $73.1 million in FY 2011, comprised of $63.3 million in general revenues, $2.1 million in federal funds and $7.6 million in restricted receipts. The retiree health calculation for judges totals $800,710, reflecting full actuarial-based financing for retired judges’ health care expense. One half of one percent in additional turnover, totaling $309,924 is also removed from Judiciary’s general revenue appropriation for personnel. Consultant services, including information technology support, stenographic services, interpreters, and legal services totals $3.0 million in FY 2011. Operating expense is $10.4 million, including $9.8 million in general revenue, for building maintenance

88

Public Safety

and repairs, janitorial expense, office supplies and equipment, outside printing costs, telephone, software maintenance and utility costs for the several buildings and court complexes operated by the Judiciary. The general revenue appropriation for operating expense is $1.1 million less than the enacted level and incorporates 0.5 percent statewide reduction, totaling $49,177 for the Judiciary. Grants total $10.8 million in FY 2011, or $386,969 more than the all funds enacted level and is comprised of $9.4 million in general revenue, $194,251 in federal funds, and $1.2 million in restricted receipts. Of this amount, $6.3 million is for judicial pensions, comprised of $5.5 million in general revenue and $841,557 for retired judges in the workers’ compensation court financed with restricted receipts. Defense of indigents is financed in the amount of $3.4 million in FY 2011. Legislative grants are provided in the amount of $378,250, and other grants total $500,944. Capital financing is provided for the Judiciary in the total amount of $1.9 million including $585,389 in general revenue, $275,800 in federal funds, $199,715 in restricted receipts and $850,787 in Rhode Island Capital Plan funds. Capital financing is provided for building renovations, computer equipment, software and licensing, and capital lease on the Judiciary’s copy machines. In FY 2011, the Judiciary was successful in implementing an acceptable cost allocation plan for the Child Support Enforcement Unit within the Family Court and will develop rates for subsequent fiscal years. The pre-2009 cost recovery plan contributed reimbursements to the general fund in the amount of $5.3 million in FY 2011. The Judiciary has $245,000 available in the current year for administrative offsets, if required. For FY 2012, the Governor recommends $102.7 million, including $88.1 million in general revenue, $3.3 million in federal funds, $10.2 million for restricted receipts, and $1.1 million in Rhode Island Capital Plan financing for the Judiciary. The recommendation represents a general revenue increase of $3.5 million from the FY 2011 enacted Budget. Salary and benefits total $76.2 million, comprised of $66.1 million in general revenue, $2.2 million in federal funds and $8.0 million in restricted receipts. Across all funds, personnel increases by $3.5 million, attributable to the 3 percent cost of living adjustment effective July 1, 2011, provision of financing for several new judges and support personnel, and statewide growth in the health care premium. Of the total amount provided for personnel, $1.0 million is attributable to retiree health care expense, estimated to be 7.2 percent of salaries in FY 2012. The personnel financing level for the Judiciary also reflects removal of 2.0 percent of general revenue financed salaries and benefits totaling $1.3 million, as part of the statewide application of turnover. In FY 2012, consultants total $2.6 million, or $525,023 less than the FY 2011 enacted amount of $3.1 million. Operating expense is $11.0 million or $1.3 million greater than the FY 2011 enacted level attributable to the Courts Technology Project, which is in the process of being implemented as its development, financed with Certificates of Participation, reaches completion. Grants total $11.1 million, including $3.5 million for defense of indigents, $378,250 in legislative grants and $508,294 in other grants. Pensions for judges appropriated in the Judiciary total $6.7 million in FY 2012 comprised of $5.8 million in general revenue with the balanced financed by restricted receipts. Capital expense is $1.7 million, comprised of $1.1 million in Rhode Island Capital Plan funds and $553,389 in general revenue for continued renovations and repair of the Court’s facilities and equipment. The Governor’s recommendation for operating expense also reflects removal of $104,482, or 1.0 percent, as part of the statewide reduction to operating codes. The Governor recommends 723.3 FTE positions in FY 2011 and FY 2012, the same as the FY 2011 enacted Budget.

89

Public Safety

Military Staff

The mission of the Military Staff and its two programs, the National Guard and the Emergency Management Agency, is to prepare for mobilization and deployment of armed forces in conditions of war or other national emergency, and to maintain public safety as directed by the Governor in cases of man-made or natural disaster. The Governor’s revised FY 2011 budget for the Military Staff is $61.5 million, including $4.2 million general revenues, $54.8 million in federal funds, $2.2 million in other funds, and $376,782 in restricted receipts. The FY 2011 revised general revenue budget is $1.4 million more than the enacted budget. There are increases of $32.6 million in federal funds and decreases of $465,693 in restricted receipts. There is a $1.3 million increase in funding for Rhode Island Capital Plan Fund projects. The recommendation includes savings from four (4) pay reduction days for all state employees, as well as a 3.0 percent COLA adjustment effective January 2011. In addition to salary and benefit adjustments to reflect current services, the Governor recommends the following:

• State Guardsmen activation costs of $148,446 in general revenue for 1) tasks related to the Governor’s and general officers’ inauguration ceremonies in January 2011; and 2) the call up in September 2010 of 209 guardsmen to assist in the response to Hurricane Earl.

• $64,200 in salary costs to be used to compensate military retirees who wish to provide ceremonial

services for the Funeral Honors program to conduct honorable and professional funeral ceremonies (including firing squads and buglers) for all eligible veterans in accordance with both state and federal legislation. The general revenue budget will finance firing squads and buglers in cases where federal regulations do not permit federal funds to be used.

• Personnel costs for 117.0 FTE’s include a $501,041 increase from the enacted budget in federal

funds for an additional six (6.0) firefighter positions at the Air Guard base facilities at Quonset Point.

• Federal grant funding for Emergency Management state homeland security grants. The Governor

recommends in FY 2011 total spending of $14.4 million for homeland security-related activities, an increase of $6.3 million from the enacted level: state and municipal first responder equipment; equipment for local emergency response teams; interoperable communications; the Urban Search and Rescue program; municipal planning, exercises, and training; state homeland security equipment, training, exercise and planning activities; law enforcement terrorism prevention; and Citizens Corps and volunteer training programs. Other related programs are in Transit Security ($761,987), and Buffer Zone Protection ($690,196).

• $1.3 million in general revenue funding for the operation of the Rhode Island Statewide

Communications Network (RISCON), a radio communications system designed to provide interoperable communications among cities and towns and the state. Funds for hardware maintenance and positions to operate the system have been transferred from the Department of Public Safety-State Police to the Emergency Management Agency. The funding includes an increase of $713,494 from the enacted level. RISCON personnel will work with federal Department of Homeland Security funding for interoperable communications. The FY 2011 revised budget includes $1.2 million in federal funds to purchase such equipment for local first responders, an increase of $974,447 from the enacted level.

90

Public Safety

• Following the issuance of a major disaster declaration, the State of Rhode Island is eligible for federal assistance for damages incurred during the March/April 2010 flood. Eligible work includes debris removal, emergency protective measures, permanent repairs to roads and bridges, water control facilities, buildings, equipment, utilities and parks and recreation facilities. The Governor’s recommends an estimate of $500,000 in general revenue to fund the 10 percent state match as required by Federal Emergency Management Agency regulations for the 90 percent expenditure estimates for state facilities ($4.5 million), municipal facilities ($13.0 million), and quasi-public facilities ($2.0 million).

• Two National Guard capital projects, U.S. Property and Fiscal Office Roof and Field

Maintenance Shop #3/Warwick Armory Windows are financed in the FY 2011 Governor’s revised budget with a total of $174,496 in federal stimulus money from the American Recovery and Reinvestment Act. In addition Rhode Island Capital Plan Funds include $500,000 for asset projection projects and $1.3 million for roof replacement at the Armory of Mounted Commands.

For the FY 2012 budget, the Governor recommends $35.1 million for Military Staff programs, including $3.6 million from general revenue, $29.9 million from federal funds, $389,311 from restricted receipts, and $1,220,000 from the Rhode Island Capital Plan Fund. Compared to the enacted FY 2011 budget, general revenue expenditures increase by $835,593, federal funds increase by $7.8 million, funding from the Rhode Island Capital Plan Fund increases by $357,500, and restricted funds decrease by $453,164. The FY 2012 recommended budget reflects adjustments required for salary and employee benefit costs. In addition to statewide target adjustments, including a 3.0 COLA adjustment, the budget includes statewide adjustments for medical benefits and retiree health. In addition to various adjustments for payroll projections and operating reductions, the Governor recommends the following:

• $65,300 in general revenue for the Funeral Honors program, to be used to compensate military retirees who wish to provide ceremonial services.

• In order to attain constrained budget levels, the Governor recommends general revenue operating

reductions in repairs, grounds maintenance, and fuel oil/natural gas, reflecting the temporary closure of the Armory of Mounted Commands, as well as the Warren, Bristol, and North Providence armories.

• Continued funding of various benefits provided to National Guard personnel, including the

Education Benefit (enrollment of eligible guardsmen in courses at state colleges), and the Life Insurance Benefit (reimbursement for federal funded life insurance for guardsmen deployed overseas).

• Continued funding in the Emergency Management program for interoperable communications of

$1.3 million general revenue and $204,366 federal funds, and homeland security activities of $10.2 million.

The Governor recommends 117.0 FTE positions in FY 2011 and FY 2012, an increase of 6.0 from the enacted level, reflecting additional federal funding for Quonset Point airbase firefighters.

91

Public Safety

Department of Public Safety

The Department of Public Safety was created by Public Law 07-73 and includes the following programs: Central Management, E-911 Emergency Telephone System, State Fire Marshal, Capital Police, Rhode Island State Police, and Municipal Police Training Academy. In FY 2012, the Governor’s recommendation includes the transfer of the Sheriffs into the Department of Public Safety from the Department of Administration. The Governor’s FY 2011 budget for the Department of Public Safety is $92.5 million, including $68.6 million in general revenue, $11.9 million in federal funds, $384,413 in restricted receipts, and $11.7 million in other funds. This recommendation is an increase of $5.7 million from the FY 2011 enacted budget of $86.7 million, and reflects an increase of $1.5 million, or 2.3 percent, in general revenue expenditures, an increase of $4.7 million, or 66.2 percent, in federal funds expenditures, an decrease of $418,693, or 52.1 percent, in restricted receipts, and an decrease of $129,073, or 1.1 percent, of other funds. The $1.5 million increase in general revenue appropriations includes an additional $1.2 million for pension costs and for contribution to the retirement system for trooper’s time spent in the training academy in prior years, an additional $375,345 for the restoration of the indirect cost recovery shortfall, an additional $293,105 for capital purchases and equipment for the State Police program, and an additional $152,196 for capital purchases for the E-911 Emergency program that are partially offset by reductions of $137,748 for vehicle maintenance in the State Police program, $126,553 in personnel expenses for the Capital Police program, and $110,964 for lease payments to the State Fleet Revolving Loan Fund. The additional revenue is net of the statewide reductions of $232,033 in personnel and $21,650 in operating.

The Governor’s recommendation for federal funds totals $11.9 million in FY 2011, which is an increase of $4.7 million from the enacted FY 2011 budget of $7.1 million. Major changes in federal funds include an additional $2.3 million from the American Recovery and Reinvestment Act, an additional $1.5 million for Homeland Security grants, an additional $150,000 for the 2007 Intelligence/Information Sharing Initiative RI Fusion grant, an additional $140,957 for the Internet Crimes Against Children grant, an additional $127,544 for the Motor Carrier Safety grant, an additional $111,467 for the Drug Enforcement grant, an additional $106,500 for the FY 2009 Urban Area Security Initiative grants, and an additional $78,637 for the Drug Recognition Expert/Standardized Field Sobriety Testing grant. The additional American Recovery and Reinvestment Act stimulus funds include an additional $1.6 million for the Edward Bryne Memorial Justice grant, an additional $309,429 for the Violence Against Women grant, an additional $155,000 for the DMV License Imaging CHIS project, an additional $139,958 for the Crime Victims Assistance grant, an additional $46.399 for the ARRA Port Security Grant program, an additional $29,849 for the Internet Crimes Against Children grant, an additional $10,876 for the Basic Training Coordinator grant, and an additional $6,176 for the Curriculum & Assessment Coordinator grant. The Governor’s recommendation for restricted receipts totals $384,413 in FY 2011, which is a reduction of $418,693 from the enacted FY 2011 budget of $803,106. This reduction is primarily due to the reductions of $375,345 for the unachievable offsets to the indirect cost recovery account and $97,263 for the Justice Assistance interest grant that are partially offset by additional funding of $76,194 in the Federal Forfeited Property program and an additional $47,950 for the Fire Academy Training Fees account. The Governor’s recommendation for other funds totals $11.7 million in FY 2011, which is a reduction of

92

Public Safety

$129,073 from the enacted FY 2011 budget of $11.8 million. This reduction is primarily due to the reduction of $566,825 in Rhode Island Capital Plan Funds that are partially offset by an additional $372,245 for Road Construction Reimbursement. The changes for the Rhode Island Capital Plan Fund include reductions of $772,095 for the State Police New Headquarters Facility project, $234,568 for the Statewide Microwave/IT Upgrade project, $150,000 for Parking Area Improvements project, and $50,000 for the Headquarter Complex Expansion project that are partially offset by an additional $379,859 for the Barracks and Foster Training Facility project, $175,000 for the State Police Offsite Operations project, and $84,979 for the State Police Headquarters Repairs and Renovations project. For FY 2011, the Governor recommends 423.2 FTE positions for the Department of Public Safety. This is an increase of 0.1 FTE positions from the enacted level of 432.1 FTE positions due to a correction in part time status made by Human Resources. The Governor’s FY 2012 budget for the Department of Public Safety is $102.3 million, including $89.4 million in general revenue, $6.5 million in federal funds, $335,749 in restricted receipts, and $6.1 million in other funds. This recommendation is an increase of $15.6 million from the FY 2011 enacted budget of $86.7 million, and reflects an increase of $22.4 million, or 33.4 percent, in general revenue expenditures, a decrease of $589,689, or 8.3 percent, in federal funds expenditures, a decrease of $467,357, or 58.2 percent, in restricted receipts, and a decrease of $5.7 million, or 48.6 percent, of other funds. The $22.4 million increase in general revenue appropriations, reflects an increase of $17.2 million due to the transfer of Sheriffs from the Department of Administration, an additional $1.2 million for the 54th State Police Training Academy recommended to begin in July of 2011, an additional $1.5 million for a half years salaries and benefits for the 30.0 recruits expected to graduate in December 2011, $1.5 million for the State’s retirement contribution for the State Police program, and includes the statewide reductions of $2.0 million in personnel, and $56,696 in operating.

The Governor’s recommendation for federal funds totals $6.5 million in FY 2012, which is a decrease of $589,689 from the enacted FY 2011 budget of $7.1 million. Major changes in federal funds include reductions of $556,482 from the American Recovery and Reinvestment Act, $243,925 for Homeland Security grants, and $233,738 for the FY 2009 Urban Area Security Initiative grants that are partially offset by additional funding of $140,957 for the Internet Crimes Against Children grant, $139,445 for the Sex Offender Registration/Notification Enhancement grant, and $118,719 for the Motor Carrier Safety grant. The reduction in the American Recovery and Reinvestment Act stimulus funds include reductions of $378,004 for the Violence Against Women grant, $84,033 for the Edward Bryne Memorial Justice grant, $56,234 for the Crime Victims Assistance grant, $22,634 for the Internet Crimes Against Children grant, and $18,134 for the Curriculum & Assessment Coordinator grant that are slightly offset by an additional $2,557 for the Basic Training Coordinator grant. The Governor’s recommendation for restricted receipts totals $335,749 in FY 2012, which is a reduction of $467,357 from the enacted FY 2011 budget of $803,106. This reduction is primarily due to the reductions of $375,345 for the unachievable savings in the indirect cost recovery program, $99,150 for the Justice Assistance interest grant, $106,000 in the Forfeited Property accounts, and $77,761 in the Federal Forfeited Property program that are partially offset by additional funding of $230,899 for the Fire Academy Training Fees account. The Governor’s recommendation for other funds totals $6.1 million in FY 2012, which is a reduction of

93

Public Safety

$5.7 million from the enacted FY 2011 budget of $11.8 million. This reduction is primarily due to the reduction of $6.3 million in Rhode Island Capital Plan Funds that are partially offset by an additional $372,245 for Road Construction Reimbursement. The changes for the Rhode Island Capital Plan Fund includes reductions of $4.8 million for the State Police New Headquarters Facility project, $2.5 million for the Statewide Microwave/IT Upgrade project, $200,000 for Parking Area Improvements project, and $475,000 for the Barracks and Foster Training Facility project that are partially offset by an additional $1.3 million for the Fire Academy, $250,000 for the Headquarters Complex Expansion project, and $100,000 for the State Police Headquarters Repairs and Renovations project. The Department of Public Safety also includes the Capital Police Rotary program. The program includes 8.0 FTE positions financed from the internal service fund. The Governor’s recommendation for the Capitol Police Rotary totals $697,675 in FY 2011 and $739,072 in FY 2012. For FY 2012, the Governor recommends 603.2 FTE positions for the Department of Public Safety. This is an increase of 180.0 FTE positions and includes an additional 180.0 FTE positions transferred with the Sheriffs program.

Office of the Public Defender

The Rhode Island Public Defender provides legal representation to indigent adults and juveniles in criminal, delinquency, termination of parental rights, and dependency and neglect cases. This representation includes a significant social service component whose focus is obtaining community mental health and substance abuse alternatives to incarceration. The Governor’s revised FY 2011 budget for the Office of the Public Defender is $10.2 million, including $9.5 million in general revenue and $618,770 in federal funds. The general revenue recommendation is $48,813 less than the FY 2011 enacted level, while the federal funds recommendation is $188,630 greater than the FY 2011 enacted level. The recommendation includes savings for four (4) pay reduction days and deferral of a 3.0 percent COLA from July 1, 2010 to January 1, 2011 for all state employees. The budget further reduces payroll by $75,408 due to current service adjustments for vacancies and benefits. The budget includes additional funding of $26,595 for contract and operating services (in trial-related and clerical services and property related and telephone expenses). The Governor recommends total expenditures of $10.9 million in FY 2012, including $10.3 million in general revenue and $576,361 in federal funds. The FY 2012 general revenue recommendation is $710,319 more than the FY 2011 enacted budget, while federal funds increase by $146,221. The budget reflects adjustments to current services required for salary and employee benefits requirements of the existing staff, as well as increases of $16,887 in contract services, and $17,981 in operating expenses. In both FY 2010 and FY 2011, the Governor’s recommended budget continues to reflect a federal grant under the American Recovery and Reinvestment Act. The Governor recommends the inclusion of $68,882 in FY 2011 and FY 2012, respectively, to fund the Providence Adult Drug Court. The recommendation also includes additional funding for the Adult Drug Court of $41,118 in FY 2011 and $121,419 in FY 2012 from a subgrant from the Supreme Court. The Governor also recommends continued inclusion of $114,809 and $36,569 in FY 2011 and FY 2012, respectively, in federal funds for a Byrne Grant to reduce caseload by establishing a felony screening process in Providence and other counties. The recommendation also includes a new federal grant of $100,000 in FY 2011 and FY 2012, the John R. Justice Incentive Grant. Funds from this grant will be loaned out as scholarly assistance to

94

Public Safety

municipal, state and federal prosecutors and defenders. The FY 2011 and FY 2012 recommendations are for 93.0 FTE positions, the same as the FY 2011 enacted level. The staff consists of attorneys supported by social workers, investigators, interpreters, information technology, intake and clerical support

95


96

Natural Resources

Natural Resources Summary

The Natural Resources function includes the Department of Environmental Management, the State Water Resources Board and the Coastal Resources Management Council. The Governor recommends total full-time equivalent positions of 446.0 FTE in FY 2011 and 446.0 FTE in FY 2012 for the natural resource function. Up to 350 temporary positions may also be utilized for seasonal support at state parks and beaches. Certain debt service for general obligation bonds issued to finance capital projects of the Narragansett Bay Commission and the Rhode Island Clean Water Finance Agency are appropriated in the Department of Administration, though the agencies themselves are not part of the state budget. The Department of Environmental Management manages and protects Rhode Island's public and common natural assets, including land, air and water resources. It manages state-owned lands, including state parks and beaches, forests, port facilities, and fish and wildlife management areas. The Department of Environmental Management administers a capital management program financed by general obligation bonds, funds from the Rhode Island Capital Plan Fund, federal funds, restricted receipts and third-party sources (for land acquisition). Capital program activities include: acquisition and development of recreational, open space and agricultural lands; municipal and non-profit grant programs for land acquisition and development; improvements to state-owned ports and recreation facilities; Superfund federal mandates; construction of new state environmental facilities; municipal wastewater facility construction grant programs; and, grants to non-governmental entities for specified water quality improvement projects. The Department of Environmental Management also monitors the use and quality of state groundwater; regulates discharges and uses of surface fresh and salt water; enforces game, fishing and boating regulations; coordinates a statewide forest fire protection plan; regulates air quality; and monitors the disposal of solid and hazardous wastes. The Coastal Resource Management Council seeks to preserve, protect and restore the coastal resources of the state. The Coastal Resource Management Council is administered by sixteen appointed representatives from the public and from state and local government, and is staffed with professional engineers, biologists, environmental scientists and marine resource specialists. The Coastal Resource Management Council issues permits regarding proposed changes in coastal facilities within an area from three miles offshore to two hundred feet inland from coastal features, including all freshwater wetlands within the coastal zone. The Coastal Resource Management Council formulates, amends, and enforces violations of the Rhode Island Coastal Resources Management Plan and Special Area Management plans. The council: develops guidelines and advises communities on harbor management plans; develops a Submerged Lands Management licensing program for public trust areas; designates public rights-of-way to the shore; and serves as the aquaculture coordinator for permitting and planning actions. The Coastal Resource Management Council is the lead agency for all dredging and implements an extensive habitat restoration effort. It also conducts public outreach and public communication campaigns on its programs and activities, and coordinates its programs with other government agencies. The State Water Resources Board is a water supply planning and development agency responsible for promoting the protection of developed and undeveloped drinking water supplies for the thirty-nine municipal water supply systems located in the state. The State Water Resources Board regulates water supply distribution lines connecting water supply systems and is creating a computerized database for drought alert communication. The State Water Resources Board also manages the Big River Management Area, a water supply reservation. The State Water Resources Board is composed of thirteen appointed representatives from the public and from state and local government. The Governor’s revised recommendation for FY 2011 from all funds for natural resource agencies is $111.8 million, an increase of $12.8 million from the enacted appropriations of $99.0 million. Of this amount, $37.6 million, or 33.6 percent, is from general revenue, $49.3 million, or 44.0 percent, is from

97

Natural Resources

How it is Financed


Federal Funds44.0%

Other 9.0%

Restricted Receipts13.4%

How it is Spent


8.2%

Personnel 63.7%


18.2%


9.8%

federal funds, $14.9 million, 13.4 percent, is from restricted receipts, and $10.0 million, or 9.0 percent, is from other funds. General revenues decrease by $128,625, or 0.3 percent, federal funds increase by $11.8 million, or 24.0 percent, attributable to carryover, new awards and the American Recovery and Reinvestment Act, restricted receipts increase by $537,511, or 3.6 percent, and other funds increased by $608,078, or 6.1 percent over the enacted level.

Of the $111.8 million recommended for natural resources for FY 2011, personnel is budgeted at $71.2 million; or 63.7 percent; operating at $11.0 million, or 9.8 percent; assistance, grants, and benefits at $9.2 million, or 8.2 percent; and capital improvements at $20.3 million, or 18.2 percent.

98

Natural Resources

How it is Financed


Federal Funds38.9%

Other 8.2%


How it is Spent

Assistance, Grants and Benef its

7.5%

Personnel 63.9%


18.1%


10.5%

The Governor’s revised recommendation for FY 2012 from all funds for natural resource agencies is $104.0 million, or an increase of $5.0 million from the enacted appropriations of $99.0 million. Of this amount, $39.0 million, or 37.5 percent, is from general revenue, $40.4 million, or 38.9 percent, is from federal funds, $16.1 million, 15.4 percent, is from restricted receipts, and $8.5 million, or 8.2 percent, is from other funds. General revenues decrease by $1.2 million or 3.1 percent, federal funds increase by $2.9 million, or 7.2 percent, attributable to carryover, new awards and the American Recovery and Reinvestment Act, restricted receipts increase by $1.7 million, or 10.6 percent, and other funds decreased by $785,970, or 9.2 percent over the enacted level.

Of the $104.0 million recommended for natural resources for FY 2012, personnel is budgeted at $66.4 million; or 63.9 percent; operating at $10.9 million, or 10.5 percent; assistance, grants, and benefits at $7.8 million, or 7.5 percent; and capital improvements at $18.8 million, or 18.1 percent.

99

Natural Resources

Environmental Management The Governor’s revised FY 2011 Budget for the Department of Environmental Management is $100.7 million, including $34.2 million in general revenue, $42.3 million in federal funds, $14.7 million in restricted receipts, and $9.4 million in other funds. This represents a total increase of $7.6 million from the enacted budget of $93.1 million. Funding changes include a decrease of $135,135 or 0.4 percent, in general revenue expenditures, an increase of $6.9 million, or 16.4 percent, in federal funds expenditures; an increase of $537,511, or 3.6 percent, in restricted receipts; and an increase of $196,900, or 2.0 percent, in other funds. The $135,135 decrease in general revenue appropriations reflect the statewide adjustment for four pay reduction days totaling $242,208. Additional general revenue changes include: an increase of $309,320 for payroll expenditures as a result of an Executive Counsel position being filled and increased financing for Parks and Recreation, $225,061 in Seasonal Recreation for payroll expenditures, contracted services, operating expenses and assistance and grants, $107,947 for payments to beach host communities, and a decrease of $187,240 for contract professional services. The Governor’s recommendation for federal funds totals $42.3 million in FY 2011, an increase of $6.9 million from the enacted FY 2011 Budget of $35.4 million. The Governor’s recommendation in the Office of the Director is an increase of $108,000 from the enacted FY 2011 Budget of $566,300, which is due to an increase of $108,000 for a Wind Turbine at Fisherman’s State Park. In the Bureau of Natural Resources, the Governor recommends an increase of $4.6 million from the enacted FY 2011 Budget of $21.4 million. Major changes include increase of $2.0 million for Land Acquisition, including the purchase of three properties, $1.0 million for the Pilot Permit Bank Program, $800,000 for Wildlife Development Construction, $615,000 for the State Wildlife Grant Implementation Contracts, and $575,000 for the Fish & Wildlife Construction grant. In the Bureau of Environmental Protection, the Governor recommends an increase of $2.3 million from the enacted FY 2011 Budget of $13.4 million. Major changes includ increase of $1.1 million for the Stimulus Diesel Emission Program, $600,000 for Air Resources Grants, $550,000 for the Stimulus EPA Brownsfields Program and $250,000 for the Stimulus Leaking Underground Storage Tank Program. The Governor’s recommendation for restricted receipts totals $14.7 million in FY 2011, an increase of $537,511 from the enacted FY 2011 Budget of $14.1 million. This increase is primarily due to an additional $322,113 in the Office of the Director and $312,195 in the Bureau of Environmental Protection. The Office of the Director’s major changes include: increases of $150,000 in the Indirect Cost Recovery Fund and $77,000 in the Bay, River and Watersheds Fund. Major changes in the Bureau of Environmental Protection are: increases of $310,000 in Water Resources, $200,000 in the Environmental Response Fund II and a decrease of $75,000 in the Oil Spill Prevention, Administration, and Response Fund. The Governor’s recommendation for other funds totals $9.4 million in FY 2011, which is an increase of $196,900 from the enacted FY 2011 Budget. The major increases for the Department of Environmental Management include an additional $200,000 for Recreational Facilities Improvements from the Rhode Island Capital Plan Fund. For FY 2011, the Governor recommends 410.0 FTE positions for the Department of Environmental Management. There is no change in FTE positions from the enacted level of 410.0 FTE positions. The Governor’s FY 2012 Budget for the Department of Environmental Management is $97.6 million, including $35.5 million in general revenue, $38.4 million in federal funds, $15.8 million in restricted

100

Natural Resources receipts, and $7.9 million in other funds. This represents a total increase of $4.4 million from the FY 2011 enacted Budget of $93.1 million and includes an increase of $1.1 million or 3.1 percent, in general revenue expenditures; an increase of $3.0 million, or 7.8 percent, in federal funds expenditures; an increase of $1.7 million, or 10.8 percent, in restricted receipts; and a decrease of $1.3 million, or 16.5 percent, of other funds. The $1.1 million increase in general revenue appropriations reflects the following statewide adjustments: a decrease of $146,546 achieved from the Health Benefit Retirement adjustment, an increase of $19,125 for Unachieved Personnel Savings and $21,122 for Retiree Health Benefits. Major general revenue changes as compared to the FY 2011 enacted budget include an increase of $57,458 for utilities and rent at the Promenade Street headquarters. There are also decreases of $366,589 in the seasonal recreation program for payroll expenditures, contracted services, operating expenses, and assistance and grants, and $212,740 for contract professional services. The Governor’s recommendation for federal funds totals $38.4 million in FY 2012 and reflects an increase of $3.0 million from the enacted FY 2011 Budget of $35.4 million. A decrease of $90,000 in the Office of the Director is attributable to the decrease of $90,000 for the Blackstone Valley Watershed project grant. In the Bureau of Natural Resources, the Governor recommends an increase of $3.0 million from the enacted FY 2011 Budget of $21.4 million. Major changes include a decrease of $1.1 million for Estuarine Reserve Construction grant and increase of $1.0 million for Wildlife Restoration & Land Acquisition, $999,930 for the Pilot Permit Bank Program, $953,424 for Wildlife Development, $668,074 for Wildlife Restoration Construction and $599,509 for the Fish and Wildlife Construction Program grant. In the Bureau of Environmental Protection, the Governor recommends a decrease of $15,917 from the enacted FY 2011 Budget of $13.4 million. Major changes include increase of $500,000 for the EPA Brownsfields Program and $470,776 for Non-Point Source Pollution Management. There are decreases of $200,000 from the Diesel Emissions Program, $175,000 from the Leaking Underground Storage Tank grant, $175,000 from the EPA Brownsfields Assessment grant, $150,000 from Homeland Security, and $144,756 from Air Toxic Monitoring Project. The Governor’s recommendation for restricted receipts totals $15.8 million in FY 2012, which is an increase of $1.7 million from the enacted FY 2011 Budget. This increase is primarily due to $1.7 million in the Bureau of Natural Resources. The Bureau’s major changes include increases of $1.7 million for Fort Adams Asset Protection and $413,966 in the State Revolving Fund Administration, decreases of $70,827 in the Environmental Response Fund II, and $502,028 in the Oil Spill Prevention, Administration, and Response Fund. The Governor’s recommendation for other funds totals $7.9 million in FY 2012, which is a decrease of $1.3 million from the enacted FY 2011 Budget of $9.2 million. The major changes for the Department include a decrease of $950,000 for the Blackstone Valley Bike Path Design and a decrease of $250,000 for Fort Adams Rehabilitation from the Rhode Island Capital Plan Fund. The Governor recommends 410.0 FTE positions for FY 2012, which is equal to the FY 2011 enacted level of 410.0 FTE positions.

Coastal Resources Management Council

The Coastal Resources Management Council’s task is to preserve and protect the state’s coastal resources through long-range planning, permitting, and enforcement actions in several fields, such as submerged lands management, rights-of-way designations, dredging coordination, coastal habitat preservation and restoration, harbor management, aquaculture development, and non-point pollution control. The Governor’s revised FY 2011 budget for the Coastal Resources Management Council is $9.3 million. This

101

Natural Resources includes $2.1 million of general revenue, $6.9 million of federal funds, and $250,000 in restricted receipts. General revenue increases by $24,688, while federal funds increase by $4.9 million, from the enacted level. General revenue personnel expenditures increase due to full funding of the agency’s personnel costs, and include statewide adjustments for four (4) pay reduction days and a deferral of COLA adjustments to January 1, 2011. In addition, the Governor recommends the continued transfer of $33,375 in contract services costs to available federal funds. Federal funds increase by $122,934 due to the balance forward of unspent funds in the federal operating line item and increased expenditure totaling $167,931 in two other federal grants (Aquatic Invasive Species and Ocean Area Management Plan). In addition, the Governor recommends expenditure schedule revisions of federal grants that were awarded in FY 2010: Narragansett Bay Habitat Restoration Planning to study shorelines to determine how organic materials can be used to restore habitats ($954,415); Aquaculture Research to foster the development of aquaculture ($345,040); and $3.3 million for the R.I. River Ecosystem Restoration project, funded by American Recovery and Reinvestment Act stimulus funds to construct four fish ladders and remove two dams. $250,000 in restricted receipt expenditures is recommended for the Coastal and Estuary Habitat Restoration Program and Trust fund from the Oil Spill Prevention, Administration and Response Fund, to be spent on specific projects to rehabilitate coastal habitats. In the FY 2012 budget, the Governor recommends $4.95 million, including $2.2 million of general revenue, $2.0 million of federal funds, $250,000 in restricted receipts, and $429,100 in Other (Rhode Island Capital Plan) funds. In addition to statewide target and other statewide adjustments of $127,243, including a 3.0 percent COLA effective June 19, 2011, the general revenue budget increase of $198,299 from the enacted budget includes $35,375 of contract legal expenditures due to the reduction in federal operating funds of $91,000 to $1.4 million, and other personnel and operating adjustments of $37,331. The Governor recommends Rhode Island Capital Plan funds of $429,100 for the South Coast Restoration project. The FTE position ceiling for the Council is unchanged at 30.0 FTE positions for FY 2011 and FY 2012. State Water Resources Board The State Water Resources Board’s overall responsibility is for the management of the state’s water resources, with a special emphasis on the drinking water supply, through financing of upgrades and land acquisition projects and through the coordination of efforts by regulatory agencies and water suppliers. The Governor’s revised FY 2011 budget for the Water Resources Board is $1.8 million, including $1.3 million in general revenue and $531,178 in other funds. The general revenue budget decreases by $18,178 from the enacted budget. The Governor’s recommended budget includes statewide adjustments for four pay reduction days and COLA deferral from July 1, 2010 to January 2, 2011. General revenue personnel expenditures increase by $5,662 from the FY 2011 enacted budget, reflecting $693,171 in full funding for the Agency’s six positions. Contract services decrease by $12,000 due to the transfer of some stream gauging costs to bond and federal funds. The Governor also recommends level funding of $249,734 for the Water Allocation Plan to conduct studies of specific surface and subsurface water supply sources. Operating expenditures decrease by $11,800 to $125,113 in copier equipment and supplies, mileage, telephone and advertising. The Governor also recommends $336,015 in full funding from the Rhode Island Capital Plan Fund for the completion of consulting services required to proceed with the development of the Big River Groundwater Supply Development project to ensure drinking water supply requirements in central Rhode Island, caused by residential, commercial and industrial expansion. The Governor also recommends the expenditure of $195,163 for ground and building repairs and improvements to the Big River Management Area financed from the Rhode Island Capital Plan Fund. In the FY 2012 budget, the Governor recommends $1.4 million, $1.2 million in general revenue and $200,000 from the Rhode Island Capital Plan Fund, a decrease of $6,273 from the enacted budget. In

102

Natural Resources addition to statewide target adjustments of $47,531, including a 3.0 percent COLA effective June 19, 2011, the budget includes $200,000 to fund Water Allocation Plan studies, a reduction of $49,734 from the enacted budget. The budget also includes $55,000 in education grants to Exeter/West Greenwich (a reduction of $44,000) and a $22,444 legislative grant to the Rhode Island Rivers Council. The Governor also recommends $200,000 in R.I. Capital Plan funds for repairs and improvements in the Big River Management Area. The Governor recommends 6.0 FTE positions in both FY 2011 and FY 2012, unchanged from the FY 2011 enacted level.

103


104

Transportation

Transportation

Summary The transportation function provides for the maintenance and construction of a quality infrastructure which reflects the transportation needs of the citizens of Rhode Island. The function is implemented by the Department of Transportation (DOT) through its core programs, transportation development and maintenance. Transportation development includes construction and design, traffic management, environmental and intermodal planning, capital programming, bridge rehabilitation/replacement, and highway safety. The DOT maintenance section engages in the routine maintenance of state highways, bridges, and associated roadsides and highway appurtenances. In FY 1994, Rhode Island established the Intermodal Surface Transportation Fund (ISTF), to provide financing for transportation expenditures from dedicated user-related revenue sources. This dedicated highway fund establishes a direct relationship between transportation project financing and the end-users of the projects, with the goal of establishing a stable revenue stream capable of financing the projects on a pay-as-you-go basis. For FY 2011, the Intermodal Surface Transportation Fund (ISTF) is supported by 32.5 of Rhode Island’s 33.0-cent per gallon gasoline tax. Gasoline tax receipts finance operating and debt service expenditures of the Department of Transportation, as well as specific portions of transportation-related expenditures of the Rhode Island Public Transit Authority (RIPTA) and the Department of Human Services (formerly the Department of Elderly Affairs). The revenue generated by the state’s gasoline tax is allocated to these recipients on an individual cent basis. State law governs the distribution of the cents to the agencies. As of FY 2010, there is no longer any contribution to the general fund from the gasoline tax. The anticipated current and upcoming fiscal year revenue collection for the gasoline tax was established at each Revenue Estimating Conference; however, as there is no longer an impact on general revenues, the Conference is no longer determining the gasoline tax estimate. The Office of Revenue Analysis within the Department of Revenue has provided the estimates for FY 2011 and FY 2012. The Office of Revenue Analysis estimates gasoline tax collections on a cent per gallon revenue yield. This yield is the basis for the development of budgets for the various gasoline tax supported operations. Since the inception of this funding mechanism for transportation activities, there have been numerous revisions to the allocation plan. Each change has been initiated in order to direct more revenues to transportation operations rather than to the general fund. There was a change to the disbursement schedule in the enacted FY 2010 Budget, which increased the RIPTA allocation and the total gasoline tax by two cents, and an increase to the Department of Transportation of one cent, with an offsetting reduction and elimination of the allocation of gasoline tax directed to the general fund. Starting in FY 2009, 0.5 of the State's 1.0 cent per gallon environmental protection regulatory fee collected by distributors of motor fuel when the product is sold to owners and/or operators of underground storage tanks is recommended to support the Rhode Island Public Transit Authority (RIPTA).

105

Transportation

Current Law Gasoline Tax Allocation (in cents)

2006 2007 2008 2009 2010 2011 2012 Recipient

DOT 20.75 20.75 20.75 20.75 21.753 21.75 21.75

RIPTA 7.251 7.25 7.25 7.752 9.754 9.75 9.75

General Fund 1.01

1.0 1.0 1.0 0.03 0.0 0.0

DEA/DHS 1.0

1.0 1.0 1.0 1.05 1.0 1.0

Underground Storage Tank-DEM

1.0 1.0 1.0 0.52 0.5 0.5 0.5

Total: 31.0 31.0 31.0 31.0 33.0 33.0 33.0 1 One additional cent was recommended for RIPTA with an offsetting reduction in the allocation of gasoline tax directed to the general fund starting in FY 2006 to finance a market survey of non-transit users and a management study of the agency 2 Starting in FY 2009, 0.5 of the 1.0 cent Underground Storage Tank fee was recommended for allocation to RIPTA 3 Starting in FY 2010, 1.0 of the remaining cent distributed to the General Fund was recommended to finance Department of Transportation operations 4 Starting in FY 2010, 2.0 new cents of gasoline tax were added to the total for 33.0 cents now collected and allocated to finance RIPTA 5 Starting in 2010, 1.0 cent formerly directed to DEA was now sent to DHS The Department of Transportation provides services through four programs: Central Management, Management and Budget, Infrastructure Engineering, and Infrastructure Maintenance. Primary funding for Rhode Island transportation and highway construction spending is provided through the Federal Highway Administration (FHWA), under the authority of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). This Act, passed in August 2005, authorized funds for highway construction, highway safety programs, mass transit operations, and other surface transportation projects for the five-year period 2005 - 2009. The Act combined the improvements scheduled for current programs with new initiatives for improving transportation safety and traffic flow efficiency, enhancing communities, and advancing economic growth. However, the Act expired in FY 2009, but was extended by Congress for one year in 2010. In 2011 financing for the federal highway program has relied on short term continuing resolutions to provide funding. No new program has been introduced to replace the SAFETEA-LU program. The uncertainty of these conditions has impacted the Department of Transportation’s budget, causing more conservative estimates to be employed. The DOT Highway Improvement Program (HIP) includes highway and intermodal projects that utilize federal funds administered by the FHWA, and highway transportation infrastructure projects financed by state matching funds, which include general obligation bonds and proceeds from certain land sales. The HIP implements DOT’s capital program as identified in the State's Transportation Improvement Program (TIP). The TIP is a listing of transportation projects that the state plans to finance over a four-year period from

106

Transportation federal highway and transit funds. Federal law requires that all projects utilizing federal transportation funds shall appear in a TIP adopted by the State Planning Council and approved by the Governor. In Rhode Island, the TIP is the product of extensive public outreach to all communities, public interest groups, and citizens throughout the state by the agencies involved in transportation planning and project implementation. Following extensive public solicitation for the current TIP, highway projects are selected by a twenty-seven member public body, known as the Transportation Advisory Committee (TAC), using criteria based on six major categories: mobility benefits; cost effectiveness; economic development; environmental impact; degree of support to local and state goals and plans; and safety/security/technology. Certain projects are reviewed by special public committees prior to selection for the TIP by the TAC. The transportation air quality subcommittee, assisted by DOT and DEM staff, conducts a solicitation and evaluation of Congestion Mitigation and Air Quality (CMAQ) proposals. A TAC subcommittee reviews new bicycle/pedestrian projects, and a DOT advisory committee solicits and evaluates application for funds earmarked in SAFETEA-LU for transportation enhancement activities. As part of the American Recovery and Reinvestment Act of 2009, the Rhode Island Department of Transportation is expected to receive a total of $137.1 million for highway infrastructure investment, of which $70.7 million has been expended prior to FY 2011, an estimated $53.1 million in FY 2011, and $13.2 million remaining to be spent in FY 2012. Sixty-eight separate projects throughout Rhode Island including highway, road and bridge repair, pavement resurfacing, as well as enhancement projects, such as lighting and drainage improvements. The Department is expecting to receive a total of $4.8 million in ARRA funds and fixed guideway infrastructure grants, which are expected to be spent over two years starting in FY 2011. An ARRA grant has been received for $350,000 which will provide training, scheduled to be expended over the next two years. FY 2004 marked the beginning of a major effort on the part of Rhode Island government to address the rebuilding and modernization of the State’s transportation systems. In November 2003, the State issued the first series in a bond program that authorizes $709.6 million and currently programs $695.9 million in construction funds for five major infrastructure projects to be completed over an 8 ½ year period. This undertaking was primarily financed through two funding mechanisms. The majority of the costs ($548.2 million) provided through Grant Anticipation Revenue Vehicle bonds (GARVEE). GARVEE represents a program approved by FHWA that allows states to borrow funds, which are backed and repaid by the annual allocation of Federal Highway Administration construction funds. A supplemental revenue bond issue known as the Motor Fuel Revenue Bonds program, which is secured by 2-cents of the department’s gasoline tax allocation, provides another $105.6 million for this infrastructure initiative. The State issued a second series of both the GARVEE and Motor Fuel Bonds program in 2006 and completed the issuance of a third series in FY 2009. The projects financed under this program are the I-195 Relocation, Washington Bridge Reconstruction, a new Sakonnet River Bridge, the construction of Quonset Rt. 403, and amounts for completion of the Freight Rail Improvement Program. The debt service on the GARVEE bonds in FY 2011 and FY 2012, to be paid through the FHWA allocation, is $48.4 million each year and is reflected in the Department’s operating budget as a federal fund source. The gasoline tax revenue supported debt service on the Motor Fuel Tax revenue bonds dedicated to the trust account is estimated to be $8.5 million in FY 2011 and $8.6 million in FY 2012. The continued emphasis towards a more balanced multimodal transportation system extends to statewide mass transit programs. As noted above, operating assistance of $40.6 million in FY 2011 and $40.8 million in FY 2012 to the Rhode Island Public Transit Authority will be financed from a 9.25 cent allocation of the gasoline tax, as well as an additional 0.5 of the 1.0 cent Underground Storage Tank fee. Another cent of the gasoline tax not included in the Department of Transportation budget supports the efforts of the Department of Human Services to streamline and enhance elderly and handicapped transportation services. Much of this

107

Transportation allocation is transferred to RIPTA to underwrite pass programs for the elderly, and to finance compliance costs statewide associated with Americans with Disabilities Act requirements. The revised FY 2011 budget for the Department of Transportation totals $451.4 million, including $340.1 million in federal funds, $110.3 million in other funds, and $1.0 million in restricted receipts. This represents a $22.5 million increase in all funds from the FY 2011 enacted budget. Federal funds increase a total of $21.3 million, while restricted receipts do not vary from the enacted budget. Other funds for the Department decrease a total of $391,413 from the enacted budget. The other funds total includes gasoline tax expenditures for the Department, RIPTA, and GARVEE/Motor Fuel Revenue Bonds, as well as Rhode Island Capital Plan Fund appropriations, land sale proceeds, nonland surplus property revenues, and other miscellaneous receipts. The revised FY 2011 estimated revenue available within the ISTEA fund is $141.1 million, which represents the revised per penny gasoline tax yield estimate of $4,267,700, as well as a carry forward from FY 2010 totaling $2,423,055 and an additional $2.1 million from 0.5 cent of the 1.0 cent Underground Storage Tank fee. Gasoline tax funds within the Department of Transportation total $103.3 million, $54.1 is recommended for the operations of the Department, $40.6 is the operating transfer to finance RIPTA, and $8.5 million is associated with the GARVEE/Motor Fuel Revenue Bonds program. Gasoline tax funds within the Department increase $1.8 million from the enacted budget. The increase is primarily a result of the revision in the gasoline tax estimate. The original estimate used in the FY 2011 Enacted Budget was $4.2 million. The estimate provided by the Office of Revenue Analysis has revised the per penny gasoline tax up to $4,267,700, an increase of $57,700 per penny. Other adjustments to the total gasoline tax appropriation for the Department include projected transfers to the Department of Administration to finance transportation related general obligation bond debt service costs of $43.6 million for DOT and $981,691 for RIPTA in FY 2011. Due to the projected deficit caused by the continued pressure on the Department’s budget with increasing debt service, stagnant gasoline tax, and a very high level of winter maintenance expenses for FY 2011, general revenue will be used to fund $12.6 million of the department’s debt service for FY 2011. The level of gasoline tax expenditure will fall to $31.1 million. The debt service adjustment to the Department represents a decrease of $13.4 million from the enacted budget. A total of $1.6 million represents the financing of Human Resources and Information Technology positions consolidated within the Department of Administration. The total transfer amount of these positions represents an increase of $267,286 from the FY 2011 enacted. It should be noted that no offset account has been utilized in the FY 2011 revised budget as the deficit has been addressed with the move of a portion of the department’s deficit to general revenue. The Governor recommends a $0 balance forecast for the end of FY 2011 to be carried forward into FY 2012. A total recommendation of $3.9 million in FY 2011 from the Rhode Island Capital Plan Fund finances the Pawtucket-Central Falls Train Station Study, RIPTA Elmwood Avenue Expansion Project, Salt Storage Facilities and Maintenance Facility improvements, and construction on the East Providence Facility. The total decrease of $343,805 represents a decline in financing available for the East Providence project. Other funds changes also include a $16.2 million decrease from the sale of land associated with the I-195 relocation project in order to reflect current project schedules. Most of the land sales are expected to take place in FY 2012. The Department estimates collecting $525,000 in FY 2011 from a maintenance fee for outside advertising. Estimates have increased $225,000 from the enacted budget. Revenue raised in FY 2011 is recommended to be used for operating expenses within the Division of Engineering that do not qualify for federal reimbursement. Federal funds increase a total of $21.3 million from the enacted budget. Part of the increase from the enacted budget is due to the Federal Highway Program projects. These expenditures are projected to

108

Transportation increase by $5.5 million from the enacted level due to the availability of earmarks from SAFETEA-LU, which has expired. Only short-term extensions have been enacted to date, as Congress wrestles with the shortfall in the Federal Highway Trust Fund. Therefore, the DOT has been conservative in their construction scheduling as the construction budget of the Department is driven by the availability of funding. There is an increase attributable to the infrastructure investment stimulus funds from the American Recovery and Reinvestment Act of 2009. Expected expenditures on highway projects increase $9.3 million from the enacted level. The total funding available for highway projects has not changed, only the timing of the expenditures. The Department has made commitments for all funds and expects to expend the remaining funds by the end of FY 2012. Stimulus funds totaling $4.1 million are included in FY 2011 for the Wickford Junction Commuter Rail Station. These funds reflect a $765,000 increase over the enacted level. The overall increase in federal funds is offset by several decreasing federal grants, such as a $1.7 million decrease in National Highway Safety Administration grants to correct actual federal grants anticipated in FY 2011 and an increase of $3.5 million in Federal Transit funds associated with the fixed guideway (commuter rail) project. National Highway Safety Administration grants total $3.0 million while federal transit grants total $26.1 million. GARVEE debt service is deducted from the total estimated obligation authority estimate for the federal highway fund, and totals $48.4 million in the revised FY 2011 budget. The revised FY 2011 budget includes a total of $12.2 million related to personnel costs associated with the GARVEE program and general obligation bonds within the federal funds category. For the Department of Transportation, the Governor recommends 772.6 FTE positions for FY 2011. The enacted budget included 772.2 positions, and includes 89.0 FTE stimulus funded positions. An addition of 0.4 FTE brought a 0.6 FTE Legal Counsel position to a full time position. In FY 2012, recommended expenditures from all sources for transportation activities total $434.9 million, an increase of $61 million from the FY 2011 enacted budget. The following chart illustrates departmental expenditures by source of financing for FY 2012. This chart does not include general obligation bond expenditures, GARVEE expenditures, and GARVEE debt service payments, with the exception of personnel costs financed by the GARVEE program and general obligation bonds.

109

Transportation

How it is Financed

General Revenue0.0%


Federal Funds72.8%

Other Funds27.0%


The other funds source represents 27.0 percent of the FY 2012 budget for the Department, or $117.4 million. This represents an increase of $8.3 million from the FY 2011 enacted budget. Other funds includes of total gasoline tax expenditures of $97.2 million, of which $48.0 million represents the Department of Transportation budget, $38.5 million is budgeted for RIPTA's allocation of the gasoline tax, with an additional $2.1 million for the 0.5 cents of the Underground Storage Fee allocated to RIPTA beginning in FY 2010, and $8.6 million is budgeted for the Motor Fuel Bond allocation of the gasoline tax. The total estimated receipts for the ISTEA fund in FY 2012 are $151.5 million, which represents a gasoline tax yield estimate of $4,290,400 per penny of the gasoline tax. Total ISTEA receipts for FY 2012 include an additional $12.0 million, which represents 20.0 percent of the Division of Motor Vehicles fees for registration and license fees; commercial drivers license fees; Operator Control registration reinstatement fees; drivers license reinstatement and assessment fees; and motor vehicle title fees. These revenues reflect a proposal to provide a stable revenue stream for the Department of Transportation, which has suffered a structural deficit caused by declining collection in gasoline tax and rising debt service. The additional revenues, which phase in an additional 20.0 percent per year, will be fully available to the DOT in FY 2016. Operating surpluses from the additional revenue will be used to reduce the issuance of G.O. bonds which have been issued at $40.0 million per year as the State’s match to the federal funds received. In FY 2016, when the entire proceeds from the specified DMV fees are available to DOT, no G.O. bond issue will be required by the Department. The additional funding source is discussed separately in this report. The total gasoline tax budget within the Department of Transportation represents an increase of $11.8 million from the FY 2011 enacted budget. However, the FY 2011 enacted budget included an offset to gas tax revenue account which reduced expenses by $6.3 million, to $85.4 million. Without the offset account, the total of DOT gasoline tax operating budget would have been $91.7 million, and the increase for the FY 2012 would be $5.5 million. Included in the FY 2012 gasoline tax budget for the Department is a general obligation bond debt service payment of $46.2 million, an increase of $1.7 million from the FY 2011 enacted budget. The RIPTA portion of the debt service payment in the Department of Administration totals $1.2 million, an increase of $87,495 from the FY 2011 enacted budget. A total of $1.6 million represents reductions to the Department’s allocation of the gasoline tax in order to finance Human Resources and Information Technology positions consolidated within the Department of Administration. The transfer represents an increase of $267,286 from the FY 2011 enacted budget. The FY 2012 budget takes into account a $0 carry forward budgeted from FY 2011.

110

Transportation The FY 2012 recommendation includes Rhode Island Capital Plan Fund expenditures totaling $3.5 million, of which $1.0 million is for Salt Storage facilities, $70,000 for RIPTA Land and Buildings, $190,400 for RIPTA Paratransit vehicles, $650,000 for Maintenance Facilities, $337,000 for the Cherry Hill facility, $300,000 for Maintenance facilities, $1.4 million for capital equipment replacement, and $125,000 is recommended for outfitting of fire alarm systems for various maintenance facilities to comply with new fire code regulations. A total of $2.0 million in other funds is from estimated land sale revenues. An additional $14.6 million is estimated from land sales associated with the relocation of the I-195 project. The remaining other funds for the Department is comprised of $110,000 for outdoor advertising and non-land surplus property collections for the budget year. The total budget for federal grants for the department represents 72.8 percent of the budget, or $316.6 million, including $202.8 million is federal highway funds, $13.2 million represents federal highway infrastructure stimulus fund grants, $260,000 is for fixed guideway stimulus funds, a total of $48.4 million is GARVEE debt service payments from federal highway funds, $7.3 million has been budgeted to account for personnel costs transferred to the GARVEE construction program, and $6.1 million represents personnel costs allocated to general obligation bonds. Other federal grants for the Department are comprised of a total of $18.7 million in Federal Transit funds and $11.4 million in National Highway Safety funds. Federal transit funds decrease by $9.2 million in FY 2012 from the enacted level. National Highway Safety funds decrease by $2.7 million over the FY 2011 enacted budget to correct actual federal grants anticipated in FY 2012. Restricted receipts represent 0.2 percent of the total budget or $1.0 million. Restricted receipts do not vary from the FY 2011 enacted budget. For FY 2012 the Governor recommends 772.2 FTE positions for the Department of Transportation, which represents an increase of 0.4 FTE from the FY 2012 enacted budget. Consistent with FY 2011 discussion, the increase reflect the change of a 0.6 Legal Counsel to a 1.0 Legal Counsel. The following chart illustrates departmental expenditures on an all funds basis by category of expenditure for FY 2012.

111

Transportation

How it is Spent

Personnel24.9%


15.8%


26.8%

Operating Transfers23.1%


9.5%

Personnel Operating Supplies and Expenses Assistance, Grants and Benefits Capital Purchases and Equipment Operating Transfers

The capital category of expenditure represents 26.8 percent of the total Department budget. Capital consists primarily of federal highway dollars located within the Engineering program for infrastructure construction costs, which have increased due to the availability of earmarks on federal highway projects, and the timing of the receipt of federal funds. There is still uncertainty associated with the expiration of the SAFETEE-LU program, which has caused the Department to be conservative in its estimates. Available funding drives the projections for the Department of Transportation. Included in the Engineering program is $16.6 million in estimated revenue from the sale and/or lease of properties. Included in this estimate is $14.6 for the sale of land associated with the relocation of Route 195. This revenue, along with $40.0 million in general obligation bond funds (not included in the operating budget), is utilized to meet matching requirements to federal highway funds provided under SAFETEA-LU. A total of 24.9 percent represents personnel costs of the Department, which includes contract services. Initiated in FY 2008, the Department's federal indirect cost recovery plan allows a portion of personnel, as well as contract services and operating costs to be eligible for federal reimbursement. A total of $18.1 million of personnel and contract services costs are located within the Maintenance program where the source of funding is the gasoline tax. The category of operating transfers represents 23.1 percent of all funds total spending for DOT, which includes the pass-through gasoline tax and underground storage tank fund revenue for RIPTA of $40.6 million, and $48.4 million which is paid for the GARVEE bonds through an operating transfer of federal highway funds. The operating category represents 9.5 percent of all funds total spending for the Department with 57.4 percent of the category representing Maintenance activities, which include pavement repair, crack sealing, pothole repair, litter collection, vehicle fleet maintenance, street and sidewalk sweeping, signage, highway light maintenance, and bridge washing. Snow and ice removal operations also fall under the management of this program.

112

Transportation Assistance, grants, and benefits represent 15.8 percent of the FY 2012 budget and consist primarily of Federal Highway Administration and Federal Transit Administration grant funds.

113


114

Five-Year Financial Projection

FY 2012 – FY 2016 Overview

Summary This Five-Year Financial Projection has been prepared pursuant to Section 35-3-1 of the Rhode Island General Laws, which requires that, the Budget Officer:

(6) Prepare a five-year financial projection of anticipated general revenue receipts and expenditures, including detail of principal revenue sources and expenditures by major program areas, which projection shall be included in the budget submitted to the general assembly pursuant to subsection 35-3-7.

The five-year projection includes tables that present anticipated revenues and expenditures for the five fiscal years ending in June 2016. Tables which detail planning values are also included. The planning values reflect policy assumptions as well as economic and demographic forecasts. The purpose of the five-year forecast is to provide a baseline fiscal outlook for the State of Rhode Island. Although the forecast may be utilized as a benchmark in assessing the affordability and desirability of alternative policy options, caution should be exercised in the interpretation of the forecast. From the FY 2012 budget base, expenditures will exceed revenues in each of the out-years projected through FY 2016. The operating deficits range from $126.0 million in FY 2013, $199.3 million in FY 2014, $295.7 million in FY 2015, and $411.4 million in FY 2016. In percentage terms, the deficits are projected to approach 3.7 percent of spending in FY 2013 and 10.7 percent in FY 2016. The expenditure-side of the budget is estimated to increase at an average annual rate of 4.3 percent from the FY 2012 base to FY 2016. Inflation, however, as measured by the CPI, is expected to grow at an average annual rate of 2.3 percent over this five year period. A number of factors are responsible for the rate of growth above inflation, as discussed in detail below. The five year projection anticipates average annual revenue growth of approximately 3.1 percent beyond the budget year, based upon the adopted November 2010 Revenue Estimating Conference forecast for the Rhode Island economy and the Governor’s recommended changes to adopted revenues. The forecasts underlying the five year projection assume that recovery in the Rhode Island economy started in FY 2011. Thus, both FY 2011 and FY 2012 begin to show year-over-year increases in general revenue. General revenue growth is expected to be modest in FY 2011 before strengthening in FY 2012 and the stabilizing in FY 2014 as the uncertainty of the economic recovery diminishes. General revenue growth remains positive in FY 2016 but at a rate below those projected for FY 2013 through FY 2015. Personal income is forecasted to grow at an average annual rate of 4.4 percent over the FY 2012 – FY 2016 period. Nonfarm employment is anticipated to grow at an average annual rate of 2.5 percent and wage and salary disbursements at an average annual rate of 4.1 percent over the FY 2012 - FY 2016 period. One risk to the revenue forecast is the timing of the economic recovery. If the recovery takes hold sooner than forecast, then the out-year growth rates, particularly in employment, would be lower. The tradeoff, of course, is that near-term revenue estimates would likely be better than currently estimated. Conversely, if the economic recovery takes hold later than forecast, then the out-year growth rates would be too optimistic and both the near-term and the out-year revenue forecasts may be overstated. Another risk to the revenue forecast is the behavior of consumers as the economy recovers. Consumer spending has historically comprised two-thirds of total spending. If post-recession, consumer spending does not rebound to pre-recession levels then the out-year revenue forecasts are likely to be overstated. Furthermore, European financial instability and unrest in the Middle East could negatively impact U.S. consumer spending. The United States has recently seen an increase in exports which may be short-lived if the European financial

115


crisis deepens. Recent turmoil in the Middle East has put significant upward pressure on energy prices, particularly oil, and a sustained increase in the price of oil could dampen consumer spending as income is diverted from discretionary purchases to gasoline and heating fuel.

Highlights The Governor’s Business Tax Competitiveness Proposal (BTCP) is focused on continuing to improve Rhode Island’s tax rate competitiveness. The BTCP is a multi-faceted approach that is designed to support all businesses in the state and make Rhode Island’s corporate tax rate competitive with its neighboring states. Starting January 1, 2012, this proposal reduces the business corporation tax rate from 9.0 percent to 8.5 percent with further one-half percentage point reductions in 2013 and 2014. In addition, the BTCP eliminates the Jobs Development Act over a three year period again beginning in 2012. Further, the BTCP restructures the corporate minimum and minimum franchise taxes by reducing the rate paid by small businesses. Finally, beginning in 2012, the BTCP requires the use of combined reporting by business corporation tax filers thereby bringing Rhode Island in line with the majority of the other New England states. By FY 2016, the BTCP is estimated to provide $14.6 million in tax relief to Rhode Island businesses. The Governor’s Sales Tax Modernization Proposal (STMP) is intended to stabilize the State’s revenues by extending the sales tax at a rate of 6.0 percent to some services and some currently exempt items. In addition, a separate 1.0 percent sales tax is imposed on a variety of other exempt items thereby ensuring that burden of the sales tax is borne by all consumers. The STMP addresses in a meaningful way Rhode Island’s structural budget deficit over the next five years. By FY 2016, the STMP is anticipated to increase general revenues by $173.3 million. The Governor’s proposal to phase-in the transfer of motor vehicle license, registration and title fees to the Intermodal Surface Transportation Fund (ISTF) for use by the Department of Transportation (DOT) is intended to ease DOT off of its overreliance on debt to provide the state match necessary to leverage available federal highway monies. The Governor’s plan is to transfer all of the revenues generated from the registration of motor vehicles and the issuance of operator’s licenses and motor vehicle titles in 20.0 percent increments over the FY 2012 through FY 2016 time period. In FY 2016, the transfer of these revenues will increase DOT’s funding by $64.2 million and the Department will no longer need to engage in debt issuance to qualify for federal highway funds. Finally, the Governor proposes the repeal of the state’s Motion Picture Production Company (MPPC) Tax Credit. The MPPC tax credit initially yields savings of $1.6 million in FY 2012 but these savings increase to $15.0 million in FY 2016 as new credits are not issued and previously issued credits are redeemed.

Economic Forecast and Revenues The economic forecast was developed by the principals of the November 2010 Revenue Estimating Conference with input from the consulting economist at Moody’s Economy and respective staff. This forecast is derived from the U.S. macroeconomic model and the State of Rhode Island economic model that Moody’s Economy.com has developed. A detailed analysis of the conferees near-term economic forecast for the State is contained in The Economy section of the Executive Summary. In that section, particular attention is paid to how the state fared relative to the past year with respect to non-farm employment and personal income growth. In addition, a brief explanation of the actual economic performance of the State against the economic forecast contained in the FY 2011 budget is undertaken. Finally, the economic forecast is presented for the out-years through FY 2016.

116


The biggest risk to the economic forecast is the actual rate of recovery for the Rhode Island economy. The economic forecast predicts a “U” shaped recovery for both the U.S. and Rhode Island economies, however, the bottom of the “U” for Rhode Island’s economic recovery is expected to be significantly broader than the bottom of the “U” for the U.S.’ economic recovery. If Rhode Island’ s recovery lags that of the U.S. by more than the length of time currently forecast, then personal income, employment, and wage and salary growth will be pushed out toward the end of the forecast horizon contained in this document. In particular, employment growth rates are expected to be positive in FY 2011 for the first time since FY 2007. During the FY 2012 – FY 2014 period, Rhode Island employment growth rates are expected to be accelerating up the “U” shaped curve. In FY 2014, Rhode Island employment growth should peak at 3.3 percent and, by FY 2015, total non-farm employment should exceed the peak reached in FY 2007. In FY 2015 employment growth slows to a rate of 2.5 percent before reaching its steady-state level of growth at 1.7 percent in FY 2016. Growth in Rhode Island personal income is expected to strengthen in FY 2011 and FY 2012, averaging more than 2.5 percent over the two year period. Beginning in FY 2013, personal income growth is expected to rise sharply to an annual rate of 5.0 percent, a level not reached since FY 2007. Further, energy prices remain a risk to both the U.S. macroeconomic and Rhode Island forecasts. As an energy importer, Rhode Island’s economy is vulnerable to both sharp increases and decreases in energy prices, with the former being more detrimental than the latter is beneficial. Finally, it should be noted that the economic forecast adopted at the November 2010 Revenue Estimating Conference does not incorporate any additional federal economic stimulus. The revenue projections contained in the five year forecast include the Governor’s Business Tax Competitiveness Proposal (BTCP). This proposal reduces the corporate income tax rate from 9.0 percent to 7.5 percent over a three year period beginning on January 1, 2012. In addition, the BTCP restructures the corporate minimum and minimum franchise taxes from a flat rate to graduated rates based on Rhode Island gross receipts. Furthermore, the BTCP implements combined reporting and phases out of the Jobs Development Act over a three year period beginning in 2012. The total Business Tax Competitiveness Proposal saves Rhode Island businesses $905,533 in taxes in FY 2012 with savings increasing to $15.6 million in FY 2016. The five year revenue projection includes the Governor’s proposals to modify the adopted Revenue Estimating Conference estimates for FY 2012. Overall revenues are expected to grow from $3.246 billion in FY 2012 to $3.544 billion in FY 2016. This is growth of $297.8 million, reflecting average annual growth of 3.1 percent. This revenue forecast includes the Governor’s Sales Tax Modernization Proposal which includes reducing the sales tax rate from 7.0 percent to 6.0 percent; the modernization of the sales tax base to cover some services and items currently exempt from the from the sales tax, both of which will be taxed at 6.0 percent; the taxation of the retail sale of medical marijuana at 6.0 percent; the expansion of the sales tax base by taxing certain currently exempt items at a 1.0 percent rate; and the disallowance of the use of insurance proceeds from a totaled or stolen motor vehicle as the trade-in allowance for a passenger car. The Governor’s Sales Tax Modernization Proposal is expected to increase revenue by $164.9 million in FY 2012 rising to $173.3 million in FY 2016. It also includes the Governor’s proposal to repeal the Motion Picture Production Company Tax Credit program. The total recaptured revenue in FY 2012 is $1.6 million growing to $15.0 million in FY 2016. Further, the five year forecast incorporates the revenue impact from the Governor’s proposal to publish separate top 100 delinquent business taxpayer and delinquent individual taxpayer lists. The separation of the current top 100 delinquent taxpayer list into two separate lists is expected to increase revenues by $2.3 million in FY 2012 declining to $132,932 in FY 2016. The five year revenue projection also includes the Governor’s proposal to require that lottery winnings in excess of $600.00 be offset against debts owed to the State Tax Administrator. The payment

117


of taxes owed from lottery winnings in excess of $600.00 would be the third priority after child support debts and benefit overpayments by the Department of Labor and Training. This proposal is estimated to increase revenues by $141,457 in FY 2012 and in subsequent years through FY 2016. The five year revenue forecast also includes increased revenues from the increase in several fees including daily and annual pass fees for residents and non-residents on both weekdays and weekends to park at state beaches. The result is an increase in revenue of $1.9 million in FY 2012 descending to $1.7 million in FY 2016. The Governor proposes to increase the license fee for securities sale representatives to $75 annually and increase the fee for a federally covered advisor to $300 annually. The increased fees within the Department of Business Regulation result in annual increased revenue of $1.2 million in FY 2012 through FY 2016. Further the five year forecast incorporates the revenue impact of several motor vehicle initiatives. The Governor proposes to mandate that insurance companies obtain official Division of Motor Vehicles driving record abstracts at least every three years for insurance ratings. In addition, the Governor seeks to institute a returned check fee of $25.00 for checks that are returned to the Division of Motor Vehicles by an issuer’s financial institution. These two revenue initiatives increase general revenues by $3.0 million in FY 2012 declining to $654,225 by FY 2016. The Governor also proposes to increase both the estate filing fee and the letter of good standing fee to $50 and levy a surcharge of 4.0 percent on the net revenues of compassion centers. These revenue proposals within the Department of Revenue result in an increase in revenue of $787,932 in FY 2012 rising to $1.2 million in FY 2016. Further the five year estimate includes the fee increase for fire code violations to $125 resulting in additional annual revenue of $40,000 in FY 2012 through FY 2016. The Governor also proposes to institute a $10 fee for the conducting applicant background clearances by the Department of Children, Youth, and Families. The resulting revenue initiative will increase annual revenues by $110,000 in FY 2012 through FY 2016. Finally, the Governor has proposed that the Department of Revenue serve as a collection agent for state agencies (i.e. gaining revenues from offset income tax refunds for probation and parole fees owed to the Department of Corrections) and increase the board and support fees at the Rhode Island’s Veterans Home to 100.0 percent of resident countable income. The resulting revenue from these initiatives total $939,824 in FY 2012 falling to $887,009 in FY 2016. As has been the case in the past, the five year forecast contains the reinstitution of the hospital licensing fee at the current rate of 5.465 percent of FY 2009 net patient revenues for a total of $141.1 million in FY 2012. The revenue from the Hospital Licensing Fee is held constant over the forecast period and is included in the FY 2013 through FY 2016 forecast horizon. One revenue change in the Governor’s proposed FY 2012 Budget to restricted receipts has a positive impact on general revenues and is included in the five year estimate through an indirect cost recovery. The Governor has proposed to reduce the Telecommunication Access Fund fee on land line phones from $0.26 to $0.15 and apply this reduced fee to wireless phones. It is estimated that there will be additional revenue of $741,600 to the Telecommunication Education Access Fund which is subject to a 10.0 percent cost recovery and enhances general revenues annually by $74,160 in FY 2012 through FY 2016. Further the five year forecast includes the reduction to the nursing home expenditure base resulting in a decrease of revenue of $704,000 in FY 2012 increasing to $1.1 million by FY 2016. The Governor’s proposal to phase-in the transfer of motor vehicle license and registration fees, commercial driver license fees, registration reinstatement fees, driver license reinstatement fees, and motor vehicle title fees to the Department of Transportation’s Intermodal Surface Transportation Fund (ISTF) in equal increments over a five year period beginning in FY 2012 is also incorporated into the five year forecast. By FY 2016 100.0 percent of the funds from these sources will be dedicated to the ISTF. The net result is a reduction in general revenues of $12.0 million in FY 2012 increasing to $64.2 million in FY 2016.

118


Finally, the Governor proposes the dissolution to the Health Services Council which collects application fees for the State’s Certificate of Need program. The result of this dissolution will be an annual reduction in departmental revenues in the five year forecast of $371,320 in FY 2012 through FY 2016. One revenue enhancement in the Governor’s proposed FY 2012 Budget has only a FY 2012 impact and thus is only included for FY 2012. This item is the $3.5 million transfer in excess reserves from the Rhode Island Resource Recovery Corporation. In the FY 2011 five year forecast, the estimated revenues were projected to be $3.184 billion by FY 2015, the last year of the forecast, reflecting average annual growth of over 1.4 percent over the FY 2011 through FY 2015 period. The current five year forecast projects $3.457 billion of revenues by FY 2015, resulting in $311.9 million more in resources than previously projected, and $3.544 billion by FY 2016. The resulting average annual growth rate for the FY 2012 through FY 2016 period is 3.1 percent more than double the FY 2011 through FY 2015 growth rate contained in the FY 2011 budget.

Expenditures Expenditure side risks must also be noted within the five-year projection. There are major initiatives within the Human Services function contained in the Governor’s FY 2012 budget which set the expenditure base at a lower level and therefore a risk to the forecast is the passage of those proposals and their successful implementation. A recurring risk to the five-year forecast relates to medical services inflation, utilization, and technological change. Beneficial changes in medical technology and the resultant change in utilization of medical services are especially difficult to forecast. These factors are particularly influential, since a significant part of the budget is driven by medical costs and since costs have been accelerating at a rapid rate. This impacts both the costs incurred for the clients the state services and its employees. While costs for medical care will continue to be an underlying driver of state personnel costs in the forecast, it is assumed that there will be a deceleration in the rate of growth for state employee health benefit costs with an average annual rate of growth of 5.6 percent through FY 2016. The forecast also assumes that state employees will continue to share in the cost of medical insurance premiums and costs will moderate due to proposed plan design changes. Another expenditure side risk involves demographic shifts such as the aging of the baby-boomer population which will present a greater need to enhance and expand the infrastructure for elderly care towards the end of the five year horizon.

Personnel and Other Operations The wage projections contained in the personnel estimates assume a 3.0 percent negotiated COLA increase in FY 2012. Step increases, longevity increases and educational incentives historically have added 1.7 percent annually to the estimated salary and fringe benefit costs and have been incorporated into the analysis. COLAs reflecting the CPI are included for FY 2013 and thereafter. In FY 2013, salary costs are projected to grow 4.5% percent reflecting the 3 percent cost of living adjustment, 1.7 percent for steps and longevity, followed by increases of 4.4 percent, 4.0 percent, and 3.9 percent through FY2016. The forecast reflects cost sharing which is expected to offset health insurance costs in FY 2012 and throughout the forecast period. Average employee cost sharing of 19 percent of medical premium cost in FY 2012 and thereafter is projected. This compares with average employee cost sharing of just 11.0 percent in FY 2009. Gross medical cost increases for health care premiums are expected to grow 7.5 percent annually on average in the forecast.

119


Despite pension reforms enacted in past legislative sessions, the costs of the State’s defined benefit plan are expected to increase at pace greater than the rate of growth for salaries. The savings from benefit plan changes are expected to be offset by additional costs related to investment losses and unrealized investment returns. According to actuarial projections by Gabriel, Roeder, Smith and Company, the annual required contribution rate for state employees is expected to increase form 22.98 percent in FY2012 to 35.88 percent in FY2016. This reflects an increase in the rate of 12.9 percentage points over a five year period. Based upon projected payroll growth and the forecasted retirement contribution rates, the general revenue funded contribution for state employee members would grow from a projected $88.1 million in FY 2012 to $162.1 million in FY 2016, reflecting growth of $74.1 million in retirement costs alone and average increase of 24 percent a year. This is the single largest growth item in the budget, reflecting growth of 84 percent from FY2012 to FY2016. Personnel and operating costs continue to be constrained during FY 2012. The Governor’s proposed FY 2012 budget includes $44 million less in personnel and operating than was projected for FY 2012 in the previous five year forecast. This highlights the success in managing costs within available resources. The current five year forecast assumes $980.3 million of personnel and operating costs in FY 2012 and an average growth of 4.0 percent over the five year interval, resulting in an estimated cost of $1.210 billion in FY 2016, an increase of $170.5 million. In FY 2013, there is a $22.0 million transfer of funds to the Rhode Island Capital Plan Fund to replenish resources that were used to restore the state rainy day fund in FY 2009.

Grants and Benefits Grants and Benefits are projected to increase by an average of 5.7 percent annually from FY 2012 to FY 2016. Most of this growth is reflected in the Department of Human Services budget, since this is where most of the Medicaid dollars are spent. The forecast for Department of Human Services grants and benefits is based on the assumption that the Federal Temporary Assistance to Needy Families Cash Assistance Program (TANF) and the RI Works Program (formerly FIP), will meet their stated objectives during the forecast period, that federal block grants will continue at current levels, and that Medicaid matching rates (FMAP) will revert to base levels after June 30, 2011. The forecast assumes that eligibility and economic influences on RI Works/Child Care caseloads will result in increases in costs of approximately 2.5 percent annually. These exclusively reflect continuing additions for child care subsidies, which are extended to the working poor even after cash assistance clients gain access to unsubsidized employment, offset savings in cash assistance. The block grant resources are assumed to be insufficient to finance these incremental costs throughout the forecast period, and, therefore, general revenue dollars are added. No additional effects from the implementation of the new RI Works program are recognized in the estimates, and it is assumed that federal TANF resources will remain sufficient to meet the entire cost of the RI Works program throughout the forecast horizon. SSI caseloads will increase slightly, as both the elderly and disabled population components are forecast to increase moderately over the five-year period, resulting in increased costs of 2.5 percent per annum, on average. DHS Medicaid projections reflect proposed reforms in both service delivery models and provider rates, including (but not limited to) the use of a price and acuity-based method of reimbursement for nursing homes, constraints on the growth of Medicaid managed care payment rates for outpatient hospital services,

120


a reduction in non-emergency transportation rates, and selective contracting for home and community based services. No further reform-based savings beyond those for FY 2012 are incorporated in the forecast, though currently recommended initiatives are embedded in the FY 2012 base for at least a portion of the fiscal year. Where appropriate, these costs savings were annualized for FY 2013 through FY 2016. Pharmacy inflation is assumed at 6.5 percent annually on average. Five-year estimates also reflect a schedule increasing federal “clawback” assessment charges for Part D Medicare benefits to dually eligible Medicaid clients at the pharmacy inflation rate. The managed care forecast assumes that base costs will inflate at 6.1 percent on average per year until FY 2016. Incorporated into the FY 2012 expenditure base for managed care is a proposal in the Governor’s Budget to limit annual increases in managed care payment rates for outpatient hospital services to no greater than the (CMS) Outpatient Prospective Payment System (OPPS) input price index. Estimated FY 2013 (the first full year of implementation) savings total $5.3 million in general revenues Similarly, cost trends in institutional long term care include an annual growth rate increasing of 5.5 percent from FY 2012 through FY 2016. The FY 2012 expenditure base for nursing care contains savings of $6.1 million in general revenues from the rate reform initiative, annualized to $8.3 million in FY 2013. The general revenue expenditures within the Services for the Developmentally Disabilities Private System are projected to increase from $86.6 million in FY 2011 to $117.7 million in FY 2016, which equates to a growth rate of 35.9 percent over the five-year period. This growth is a result of assumed trend of approximately 7.5 percent each year. There are several factors that could significantly impact expenditures during the forecast period. These include general economic conditions that negatively impacting Rhode Islanders; the aging of caregivers; the aging of the existing population; and greater public awareness of the availability and, therefore, the utilization of services. Efforts to restructure the network of providers serving persons with developmental disabilities and efforts to increase shared living arrangements over and above those contained in the Governor’s FY 2012 Budget should serve to constrain growth below those contained in the projection. It should be noted that the expenditures only reflect the residential, day program, respite and supported employment services. Medical costs under the Medicaid program are reflected in Department of Human Services’ grant costs. Cost trends for general revenue state match expenditures to the Medicaid, Title IV-E, and other grant programs in the Department of Children Youth and Families are projected to grow from $78.5 million to $97.1 million between FY 2012 and FY 2016. This increase of only $18.6 million over the five year period represents the Department’s continued success in transitioning to community based service agency.

Local Aid

Local aid expenditures include education aid, the Motor Vehicle Excise Tax Reimbursement, aid to local libraries comprised of Library Resource Sharing and Library Construction Aid, the Payment in Lieu of Taxes (PILOT) program, the Property Revaluation program, and the Distressed Communities Relief program. The Motor Vehicle Excise Tax Reimbursement, Library Resource Sharing and PILOT are assumed to grow by CPI over the period averaged at 2.4 percent. Growth in Library Construction Aid and the Property Revaluation program are forecasted based on proposed schedules. Lastly, Distressed Communities Relief is assumed to be level-funded over the period at the currently enacted level of $10.4 million. In dollar terms, the largest driving force behind expenditure growth from FY 2012 to FY 2016 is Education Aid programs, which are expected to increase by a total of $198.5 million from the FY 2012 base level of

121


$831.1 million. This drastic rise is a direct result of the new education funding formula which contains a ten year transition period. Districts that stand to gain money will do so over seven year period, while losing districts will gradually lose funding over the full ten years. The Department of Elementary and Secondary Education’s most recent estimates show an increase of $12.2 million between years two through seven of implementation. Between years eight and ten, a decrease of $6.3 million should be achieved as the gaining portion of the transition period will come to an end. In general, because of how the transition rules are structured, districts losing money are given more time to adjust, causing the early years of the transition period to cost more. The funding formula is primarily data driven. As a result, changes may occur in the core instruction amount, the state share calculation, increases or decreases in student populations, changes in median family income, student movement between charter schools or state schools, as well as increases or decreases in free and reduced lunch students. To anticipate for these changes, a one percent growth rate has been included within the five-year forecast. Lastly, the forecast assumes that $31.3 million from the Education Jobs Fund Bill will be restored in general revenue funding beginning in FY 2013. State contributions for teachers’ retirement increase by $57.7 million, from $82.7 million in FY 2012 to $140.4 million in FY 2016. Projections for future required employer contributions to the teachers’ retirement fund reflect two percent teacher payroll growth and increased contribution rates from 22.32 percent in FY 2012 to 34.2 percent in FY 2016. Housing aid, which reimburses communities for part of the debt incurred for new school construction is projected to increase by $17.9 million, from $72.5 million to $90.4 million.

Capital The projection of capital project disbursements and debt service costs reflects updated debt service projections as included in the FY 2012 – FY 2016 Capital Improvement Plan. General revenue funded debt service on all tax supported obligations are projected to rise from $162.3 million in FY 2012 to $201.5 million in FY 2016, an increase of $39.3 million. The increase is attributable largely to the issuance of debt for the Historic Tax Credit stabilization program, which increases by $20.8 million, the issuance of general obligation debt, which increases by $20.2 million, and is offset by reductions in other categories as described below. The five year forecast is based upon outstanding debt and projected new debt contained in the Governor’s recommended FY 2012-2016 Capital Budget. - Interest rates for fixed rate general obligation bonds to be issued to fund projects are projected at 5.0 percent. Interest rates for issuance of twenty-year fixed rate certificates of participation are estimated at 5.5 percent. Historic Tax Credit debt is projected to be issued at 6 percent over 9 years in 2011, 2012, and 2013 and reflects an estimated $56 million reduction in bonds issued from the overall authorization due to lower project engagement. The lower general obligation bond issuance reflects the Governor’s proposal to reduce the reliance on debt issues for the Department of Transportation to provide state match for federal funds. Projected amortization schedules are found in the exhibits contained in Appendix C of the State’s Capital Budget. FY 2011 General Obligation Bonds - $159.8 million ($40.0 million for DOT) FY 2011 Historic Tax Credits - $40.0 million FY 2011 Pastore/Zambarano Energy - $15.0 million FY 2012 Historic Tax Credits - $35.2.0 million FY 2012 General Obligation - $100.0 million ($40 million for DOT) FY 2013 General Obligation - $99.0 million ($39 million for DOT) FY 2013 Historic Tax Credits - $75.0 million

122


FY 2014 General Obligation Bonds - $82.0 million ($22 million for DOT) FY 2015 General Obligation Bonds - $76.0 million ($16.0 million for DOT) FY 2016 General Obligation Bonds - $60.0 million (zero for DOT) Amortization of existing debt combined with new debt issuance, results in increased general revenue appropriations for debt service of $39.3 million from FY 2012 to FY 2016. Disbursements for capital projects are reflected as Rhode Island Capital Plan Fund expenditures, not general revenue, and therefore are not reflected in the five-year report as operating costs. Between FY 2012 and FY 2016, there is an increase of $20.8 million for debt for the Historic Tax Credit stabilization program, and a $20.2 million increase for general obligation debt. Performance based obligations increase remains at $7.0 million. Debt service on certificates of participation decreases by $1.6 million from $30.2 million in FY 2012 to $28.5 million in FY 2016. Convention Center debt service remains at $23.1 million. The projected general revenue requirements for debt service are dependent upon the allocation of debt service costs to other sources of funds. It is assumed that the Department of Transportation’s general obligation bond debt service in FY 2012 will total $46.2 million, and $48.5 million in FY2016. This debt service estimate reflects the Governor’s proposed plan to decrease the issuance amount for Department of Transportation and replace will replace pay-go capital such that by 2016, there would be no new debt issued to provide state match for federal capital funds. The debt service on bonds issued from FY 2012 – FY 2015 would be allocated such that the transportation debt would be back loaded to provide for minimal debt service growth during the transition period. After FY 2016, debt service requiring a portion of gas tax revenues would decline from FY 2017 until all outstanding debt is paid off. It is assumed that the two cents of the gas tax dedicated to Motor Fuel bonds issued by EDC is equal to approximately $8.4 million annually. It is assumed that the Rhode Island Public Transit Authority debt service funded by gas tax revenues in FY 2012 will total $1.2 million in FY2012 and $2.7 million in FY2016. The obligations arising from performance based contracts between the Rhode Island Economic Development Corporation and private entities are projected to require the same amount of state appropriations due to the projected achievement of performance targets. Fidelity job rent credits are expected to result in a state obligation of $3.5 million in FY 2012 and $3.5 million in FY 2015The FY 2011 obligation reflects projected payments of $2.488 million on Phase I, plus $0.05 million due on Phase II. The forecast assumes no requirement for the Bank of America obligation transaction, which if earned would total approximately $0.3 million. The Providence Place Mall sales tax is expected to continue to fund the maximum $3,560,000 debt service. Other The projection also assumes that capital disbursements from general revenues would be $5.4 million in FY 2012, and thereafter. This includes all expenditures which would be subject to fixed assets recording.

123

General Revenue Outyear Estimates FY 2012 - FY 2016

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Opening Surplus $16.2 $0.0 $0.0 $0.0 $0.0

Plus:Taxes and Departmentals 2,881.9 2,973.0 3,044.5 3,115.1 3,154.9Other Sources 364.0 370.8 373.8 380.9 388.7Budget Stabilization Fund (91.3) (100.3) (102.5) (104.9) (106.3)

Total Available 3,170.7 3,243.4 3,315.8 3,391.1 3,437.3

Minus Expenditures 3,169.8 3,369.4 3,515.1 3,686.8 3,848.8

Equals Ending Balance $0.9 ($126.0) ($199.3) ($295.7) ($411.4)

Operating Surplus or Deficit ($15.3) ($126.0) ($199.3) ($295.7) ($411.4)

Budget & Cash Stabilization Balance $150.1 $167.2 $170.9 $174.8 $177.2RI Capital Fund Balance 0.4 0.2 0.1 18.6 72.1

Rhode Island Capital Fund Capital Projects Disbursements 84.6 105.4 98.9 82.5 50.4

Outyear Expenditures vs. Available Funds

$2,600

$3,100

$3,600

$4,100

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

mill

ions

Total Available Expenditures

124

General Revenue Outyear EstimatesFY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Personal Income Tax 950,004,002$ 1,008,871,587$ 1,071,130,403$ 1,125,291,990$ 1,160,818,145$

General Business Taxes:Business Corporations 130,364,537 140,347,623 145,631,808 152,555,563 156,890,024 Public Utilities 99,000,000 99,603,430 101,158,079 102,712,728 104,267,377 Financial Institutions 500,000 570,785 842,659 891,648 244,423 Insurance Companies 100,904,966 106,380,994 110,638,868 115,839,671 117,553,213 Bank Deposits 1,950,000 2,010,652 2,071,305 2,131,959 2,192,610 Health Care Provider 41,371,888 43,863,899 45,606,282 47,140,303 48,739,767 General Business Taxes 374,091,392$ 392,777,382$ 405,949,001$ 421,271,872$ 429,887,415$

Sales and Use Taxes:Sales and Use 989,482,799 1,015,599,320 1,022,250,811 1,029,414,734 1,036,347,520 Motor Vehicle 42,100,000 32,886,700 23,488,782 13,707,873 3,493,972 Motor Fuel 1,100,000 1,091,960 1,120,966 1,090,775 1,124,464 Cigarettes 131,800,000 128,717,807 125,573,535 122,500,106 119,507,792 Alcohol 12,200,000 12,531,792 12,685,420 12,890,664 13,106,598 Controlled Substances - - - - - Sales and Use Taxes 1,176,682,799$ 1,190,827,580$ 1,185,119,514$ 1,179,604,153$ 1,173,580,346$

Other Taxes:Inheritance and Gift 28,900,000 30,375,356 31,750,837 33,007,027 34,256,917 Racing and Athletics 1,100,000 1,059,940 1,043,769 1,046,783 1,017,423 Realty Transfer Tax 6,500,000 6,174,088 6,461,095 6,715,017 6,810,857 Other Taxes 36,500,000$ 37,609,384$ 39,255,701$ 40,768,826$ 42,085,197$

Total Taxes 2,537,278,193$ 2,630,085,933$ 2,701,454,618$ 2,766,936,840$ 2,806,371,103$

Total Departmental Receipts 344,580,999 342,884,100 343,038,258 348,137,119 348,570,433

Taxes and Departmentals 2,881,859,191$ 2,972,970,032$ 3,044,492,877$ 3,115,073,960$ 3,154,941,537$

Other SourcesOther Miscellaneous 7,290,000 7,560,000 3,760,000 3,760,000 3,760,000 Lottery Commission Receipts 351,500,000 357,889,320 364,624,122 371,634,156 379,283,896 Unclaimed Property 5,200,000 5,316,982 5,437,981 5,544,505 5,652,807 Other Sources 363,990,000$ 370,766,301$ 373,822,103$ 380,938,661$ 388,696,704$

Total General Revenues 3,245,849,191$ 3,343,736,333$ 3,418,314,979$ 3,496,012,621$ 3,543,638,240$

125

General Revenue Outyear EstimatesFY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Personal Income Tax 1.4% 6.2% 6.2% 5.1% 3.2%

General Business Taxes:Business Corporations 5.7% 7.7% 3.8% 4.8% 2.8%Public Utilities 2.1% 0.6% 1.6% 1.5% 1.5%Financial Institutions 100.0% 14.2% 47.6% 5.8% -72.6%Insurance Companies 2.8% 5.4% 4.0% 4.7% 1.5%Bank Deposits 2.6% 3.1% 3.0% 2.9% 2.8%Health Care Provider 2.2% 6.0% 4.0% 3.4% 3.4% General Business Taxes 3.6% 5.0% 3.4% 3.8% 2.0%

Sales and Use Taxes:Sales and Use 22.8% 2.6% 0.7% 0.7% 0.7%Motor Vehicle -18.7% -21.9% -28.6% -41.6% -74.5%Motor Fuel 0.0% -0.7% 2.7% -2.7% 3.1%Cigarettes -2.4% -2.3% -2.4% -2.4% -2.4%Alcohol 1.7% 2.7% 1.2% 1.6% 1.7%Controlled Substances Sales and Use Taxes 17.0% 1.2% -0.5% -0.5% -0.5%

Other Taxes:Inheritance and Gift 2.1% 5.1% 4.5% 4.0% 3.8%Racing and Athletics -12.0% -3.6% -1.5% 0.3% -2.8%Realty Transfer Tax 1.6% -5.0% 4.6% 3.9% 1.4% Other Taxes 1.5% 3.0% 4.4% 3.9% 3.2%

Total Taxes 8.5% 3.7% 2.7% 2.4% 1.4%

Total Departmental Receipts 2.9% -0.5% 0.0% 1.5% 0.1%

Taxes and Departmentals 7.8% 3.2% 2.4% 2.3% 1.3%

Other SourcesGas Tax Transfers n/a n/a n/a n/a n/aOther Miscellaneous -44.4% 3.7% -50.3% 0.0% 0.0%Lottery Commission Receipts 1.2% 1.8% 1.9% 1.9% 2.1%Unclaimed Property -1.9% 2.2% 2.3% 2.0% 2.0% Other Sources -0.5% 1.9% 0.8% 1.9% 2.0%

Total General Revenues 6.8% 3.0% 2.2% 2.3% 1.4%

126

General Revenue Outyea

State OperationsPersonnelOther State Operations

Subtotal

Grants and BenefitsDepartment of Human ServicesHospitalsManaged CareNursing CareHome CareOther MedicaidPharmacyCash Assistance - TANF/FIP/Child CareCash Assistance - SSIClawbackDSH

Department of HealthAIDS MedicaidHIV/ADAP Formulary (CNOM)

Department of Elderly AffairsMedicaid (Case Mang't & Core Waiver)

Department of Children Youth & FamilieChildren & Family Services

Department of Mental Health RetardationDevelopmental Disabilities-Private

Other Grants and Benefits

Subtotal

Local AidEducation Aid General Revenue Sharing GRS - VLTMotor Vehicle Tax Reimbursements Motor Vehicle - VLTPILOTDistressed CommunitiesCentral Falls Stabilization PaymentLibrary AidProperty Revaluation Prgm

Subtotal

CapitalDebt Service

General ObligationHistoric Tax Credit ProgramCOPS/Other LeasesConvention CenterPerformance BasedTANS

Capital ImprovementsOther Projects

Subtotal

Repayment To RI Capital FundOperating transfer to RICAP

Total

Difference

ar Expenditure EstimatesFY 2012 FY 2013 FY 2014 FY 2015 FY 2016

$841,800,000 $890,000,000 $921,700,000 $957,500,000 $989,100,000138,500,000 142,200,000 145,500,000 148,700,000 151,800,000

$980,300,000 $1,032,200,000 $1,067,200,000 $1,106,200,000 $1,140,900,0005.3% 3.4% 3.7% 3.1%

44,140,000 46,680,000 49,350,000 52,100,000 55,180,000394,290,000 409,290,000 433,930,000 463,720,000 495,930,000157,550,000 163,260,000 172,010,000 181,790,000 192,570,000

37,460,000 40,360,000 44,270,000 48,580,000 53,280,00039,230,000 38,240,000 41,100,000 44,220,000 47,590,000

5,390,000 5,750,000 6,120,000 6,490,000 6,930,00010,640,000 11,450,000 11,760,000 12,030,000 12,300,00018,910,000 19,440,000 19,970,000 20,430,000 20,880,00046,500,000 61,450,000 65,330,000 69,340,000 74,070,00061,070,000 62,780,000 64,470,000 65,960,000 67,410,000

360,000 380,000 410,000 440,000 480,000700,000 750,000 810,000 870,000 930,000

5,730,000 6,140,000 6,600,000 7,100,000 7,640,000

es78,470,000 77,970,000 83,810,000 90,170,000 97,050,000

on & Hospitals86,590,000 94,580,000 101,660,000 109,380,000 117,720,000

138,120,000 140,890,000 144,830,000 148,740,000 152,160,000

$1,125,150,000 $1,179,410,000 $1,246,430,000 $1,321,360,000 $1,402,120,0004.8% 5.7% 6.0% 6.1%

831,070,000 899,360,000 938,750,000 983,400,000 1,029,620,0000 0 0 0 00 0 0 0 0

10,000,000 10,280,000 10,560,000 10,800,000 11,040,0000 0 0 0 0

27,580,000 28,820,000 30,050,000 31,250,000 32,500,00010,380,000 10,380,000 10,380,000 10,380,000 10,380,000

4,900,000 0 0 0 011,600,000 11,670,000 13,170,000 13,160,000 13,230,000

1,130,000 1,610,000 520,000 980,000 1,960,000$896,660,000 $962,120,000 $1,003,430,000 $1,049,970,000 $1,098,730,000

7.3% 4.3% 4.6% 4.6%

77,990,000 58,340,000 94,890,000 99,620,000 98,170,00022,640,000 28,380,000 35,010,000 43,430,000 43,440,00030,170,000 50,000,000 31,170,000 29,390,000 28,540,00023,140,000 23,140,000 23,140,000 23,080,000 23,080,000

7,000,000 7,000,000 7,000,000 7,000,000 7,000,0001,320,000 1,320,000 1,320,000 1,320,000 1,320,000

05,470,000 5,470,000 5,470,000 5,470,000 5,470,000

$167,730,000 $173,650,000 $198,000,000 $209,310,000 $207,020,0003.5% 14.0% 5.7% -1.1%

22,000,000

$3,169,840,000 $3,369,380,000 $3,515,060,000 $3,686,840,000 $3,848,770,000

$199,540,000 $145,680,000 $171,780,000 $161,930,0006.29% 4.32% 4.89% 4.39%

127

General Revenue Outyear Planning Values

Estimates and Growth FY2012 FY2013 FY2014 FY2015 FY 2016

Personal Income (billions) [1] $46.2 $48.5 $50.6 $52.6 $54.5Change 3.2% 5.0% 4.4% 3.9% 3.7%

Nonfarm Employment (thousands) [1] 461.0 475.7 491.3 503.8 512.2Change 1.6% 3.2% 3.3% 2.5% 1.7%

Personal Income TaxWages and Salaries [1] 2.4% 5.4% 5.3% 4.2% 3.4%

Business Corporation Tax [2], [3] 6.2% 13.4% 8.4% 4.2% 4.0%Provider Tax [3] 3.2% 6.9% 2.8% 2.2% 4.2%Sales Tax

Wages and Salaries [1] 2.4% 5.4% 5.3% 4.2% 3.4%Gasoline Tax

Real Consumption [4] 4.3% 0.7% 0.1% 1.0% 1.4%Other Taxes and Departmentals [17] 0.3% -0.8% -0.6% 0.1% -1.1%CPI-U (U.S.) [1] 2.0% 2.8% 2.7% 2.3% 2.2%Salaries and Fringe Benefits

Salary COLA - [13], CPI-U [1] 3.0% 2.8% 2.7% 2.3% 2.2%Steps and Longevity Increases [3] 1.7% 1.7% 1.7% 1.7% 1.7%Medical Benefits Costs [8] 3.8% 4.5% 6.0% 6.9% 6.9%Retiree Health Costs [14] 6.86% 6.86% 6.86% 6.86% 6.86%State Employees Retirement Costs [15] 22.98% 26.27% 29.54% 33.35% 35.88%

Home Health CareExpenditure Growth [5] 21.9% 9.5% 9.7% 9.7% 9.7%

Nursing Home CareExpenditure Growth [6] 19.5% 5.1% 5.4% 5.7% 5.9%Medicaid Reform Deflator [10] 0.0% 0.0% 0.0% 0.0% 0.0%

Managed Care/State Employee PlanExpenditure Growth [8] 3.8% 4.5% 6.0% 6.9% 6.9%Medicaid Reform Deflator [10] 0.0% 0.0% 0.0% 0.0% 0.0%

Other DHS MedicaidExpenditure Growth [7] 21.4% 7.2% 7.5% 7.6% 7.6%Medicaid Reform Deflator [10] 0.0% 0.0% 0.0% 0.0% 0.0%

MHRH- Mental HealthExpenditure Growth [8] 3.8% 4.5% 6.0% 6.9% 6.9%

DCYF ServicesExpenditure Growth [7] 21.4% 7.2% 7.5% 7.6% 7.6%Medicaid Reform Deflator [10] 0.0% 0.0% 0.0% 0.0% 0.0%

MHRH- MR/DDExpenditure Growth [7] 21.4% 7.2% 7.5% 7.6% 7.6%Medicaid Reform Deflator [10] 0.0% 0.0% 0.0% 0.0% 0.0%

PharmacyExpenditure Growth [9] 15.3% 6.8% 6.3% 6.1% 6.8%

Hospital CareExpenditure Growth [16] 14.4% 5.8% 5.7% 5.6% 5.9%

[1] November 2010 Revenue Estimating Conference Consensus Economic Forecast., FY 2010 - FY 2015.[2] Moody's Economy.com Quarterly U.S. Economic Forecast November 2010, Nominal Corporate Profits Before Tax.[3] State of Rhode Island Budget Office Estimate.

[4][5] CMS National Health Expenditures Projections February 2010, 2009-2019, Home Health Care: Total State and Local[6] CMS National Health Expenditures Projections February 2010, 2009-2019, Nursing Home Care: Total State and Local[7] CMS National Health Expenditures Projections February 2010, 2009-2019, Total Health Expenditures: State and Local Medicaid[8] CMS National Health Expenditures Projections February 2010, 2009-2019, Total Health Expenditures: Private Insurance as proxy[9] CMS National Health Expenditures Projections February 2010, 2009-2018, Prescription Drugs: Total State and Local[10] No extraordinary decrease in expenditures unique to RI is forecasted in this five year forecast.[11] November 2008 CEC estimates and DHS Fiscal Year FY 2009 Forecast. [12] HCFA (CMS) National Health Care Expenditures Projections 1965-2017, Personal Health Care.[13] Based on contractual obligations for 2011 and 2012; FY 2012 and thereafter - CPI.[14] Reflects funding on an actuarial basis beginning with Fiscal 2011.[15][16] CMS National Health Expenditures Projections February 2010, 2009-2019, Total Health Expenditures: State and Local Medicaid

[17]

State of Rhode Island Budget Office Estimate for FY 2011 & FY 2012. Moody's Economy.com Quarterly U.S. Economic Forecast November 2010, Real Gasoline and Oil Consumption.

Estimate of actuarially required contribution based upon a % of payroll.

State of Rhode Island Budget Office Estimate, Consisting of all Other Taxes plus Departmentals minus Personal Income, Business Corporation, Health Care Provider Assessment, Sales and Use Taxes and Other Sources

128

Appendix A Schedules

FY 2012 General Revenue Budget Surplus FY2009 FY2010 FY2011 FY2011 FY 2012Audited Audited (1) Enacted (2) Revised (3) Recommendeed (4)

SurplusOpening Surplus ($42,950,480) ($62,286,103) $14,216 $17,889,522 $16,172,702Reappropriated Surplus 1,738,518 998,143 - 3,364,847 -

Subtotal ($41,211,962) ($61,287,960) $14,216 $21,254,369 $16,172,702

General Taxes 2,338,696,429 2,320,872,610 2,317,150,000 2,317,150,000 2,350,691,899 Revenue estimators' revision 21,850,000 29,558,101 Changes to the Adopted Estimates - 157,028,192

Subtotal $2,338,696,429 $2,320,872,610 $2,317,150,000 $2,339,000,000 $2,537,278,192Departmental Revenues 318,804,246 333,128,045 345,226,745 345,226,745 351,107,232

Revenue estimators' revision - (10,526,745) (11,990,688) Changes to the Adopted Estimates - 97,880 5,464,455

Subtotal $318,804,246 $333,128,045 $345,226,745 $334,797,880 $344,580,999Other Sources

Gas Tax Transfers 4,327,710 24,134 - - - Revenue estimators' revision - - - - Changes to the Adopted Estimates - - - - Other Miscellaneous 17,813,994 12,466,517 5,331,000 5,331,000 3,924,759 Rev Estimators' revision-Miscellaneous - 5,524,000 (134,759) Changes to the Adopted Estimates - 2,268,285 3,500,000 Lottery 337,515,478 344,672,747 346,138,520 346,138,520 352,835,021 Revenue Estimators' revision-Lottery - 1,361,480 (1,335,021) Changes to the Adopted Estimates - - Unclaimed Property 8,044,126 5,867,150 6,000,000 6,000,000 5,603,000 Revenue Est revision-Unclaimed Property - (700,000) (403,000)

Subtotal $367,701,308 $363,030,548 $357,469,520 $365,923,285 $363,990,000

Total Revenues $3,025,201,983 $3,017,031,203 $3,019,846,265 $3,039,721,165 $3,245,849,191Transfer to Budget Reserve (66,093,533) (70,913,882) (78,516,373) (79,497,878) (91,336,613)

Total Available $2,917,896,488 $2,884,829,361 $2,941,344,109 $2,981,477,656 $3,170,685,280

Actual/Enacted Expenditures $3,001,184,448 $2,863,574,992 $2,942,118,704 $2,942,118,704 $3,169,836,026Reappropriations - - 3,364,847 Caseload Conference Changes (9,507,723) FMAP Makeup 37,289,357 Other Changes in Expenditures (7,960,231)

Total Expenditures $3,001,184,448 $2,863,574,992 $2,942,118,704 $2,965,304,954 $3,169,836,026

Free Surplus ($62,286,104) $17,889,522 ($774,595) $16,172,702 $849,254$22,000,000

Reappropriations (998,144) (3,364,847) - - Total Ending Balances ($83,287,960) $21,254,369 ($774,595) $16,172,702 $849,254

Budget Reserve and Cash Stabilization Account $80,144,551 $112,280,314 $126,834,140 $128,419,649 $150,053,007

(3) Reflects the Governor's recommended FY 2012 budget, including the results of the November 2010 Revenue and Caseload Estimating Conferences, and any proposed legislative changes to modify adopted estimates.

(1)Derived from the State Controller's final closing report for FY 2010, dated January 13, 2011, reflecting a surplus of $17,889,522.(2) Reflects the final FY 2011 budget enacted by the General Assembly in June 2010, reflecting the revenue estimates adopted at the May 2010 Revenue Estimating Conference and further modified by legislative changes in the enacted budget. Legislation approved separate from the budget, which impacted VLT revenues, reduced lottery revenues by $800,280.

(3) Reflects the enacted revenues and expenditures adjusted for revenue and caseload estimates adopted at the November 2010 Revenue and Caseload Estimating Conferences and adjustments to revenues and expenditures recommended by the Governor.

A-1

Expenditures from All FundsFY 2009 FY 2010 FY 2011 FY 2011 FY 2012

Actual Actual Enacted Revised Recommend

General Government

Administration (1) $590,402,612 $557,074,835 $499,299,809 $524,787,282 $415,042,687

Business Regulation 9,890,284 9,313,438 10,899,430 $11,416,788 $12,924,686

Labor and Training 802,946,556 1,022,130,923 833,558,439 $863,956,343 $495,678,123

Revenue 228,202,474 269,354,051 236,330,417 $260,103,279 $335,895,736

Legislature 33,526,670 32,080,717 39,049,144 $38,545,405 $38,697,252

Lieutenant Governor 852,985 848,369 924,479 $889,100 $997,002

Secretary of State 7,031,779 5,999,701 7,503,274 $7,340,745 $6,931,292

General Treasurer 25,478,600 26,761,576 33,018,358 $27,352,850 $32,677,673

Board of Elections 2,042,870 1,202,211 3,957,971 $3,219,832 $1,965,905

Rhode Island Ethics Commission 1,349,727 1,366,012 1,482,659 $1,454,869 $1,560,008

Governor's Office 5,171,858 5,320,273 6,251,152 $5,267,194 $5,256,095

Commission for Human Rights 1,373,186 1,284,241 1,371,667 $1,386,914 $1,455,570

Public Utilities Commission 5,635,606 5,989,976 7,726,656 $7,715,020 $8,105,006

Rhode Island Commission on Women 112,321 71,068 0 $0 $0

Subtotal - General Government $1,714,017,528 $1,938,797,391 $1,681,373,455 $1,753,435,621 $1,357,187,035

Human Services

Office of Health & Human Services 7,075,641 5,089,966 7,167,709 $7,741,985 $16,778,680

Children, Youth, and Families 249,961,029 234,187,262 237,598,173 $230,109,530 $210,943,797

Elderly Affairs 32,652,770 25,226,866 26,712,596 $32,213,748 $27,486,148

Health 122,192,215 131,659,235 116,146,808 $156,861,874 $151,467,696

Human Services 1,834,948,238 2,030,770,762 2,285,305,550 $2,222,635,065 $2,239,993,085

Mental Health, Retardation, & Hospitals 466,591,487 458,930,214 446,750,327 $455,264,821 $441,952,625

Veterans Affairs 0 0 0 $0 $28,688,112

Governor's Commission on Disabilities 599,120 578,829 824,453 $818,629 $829,892

Commission On Deaf and Hard of Hearing 337,416 339,304 362,824 $364,802 $387,985

State Council on Developmental Disabilities 0 0 - $0 $0

Office of the Child Advocate 512,005 552,865 589,627 $602,749 $652,432

Office of the Mental Health Advocate 441,061 381,030 440,950 $438,733 $468,718

Subtotal - Human Services $2,715,310,982 $2,887,716,333 $3,121,899,017 $3,107,051,936 $3,119,649,170

Education

Elementary and Secondary 1,055,130,894 1,080,094,111 1,128,732,869 $1,173,230,843 $1,138,601,394

Higher Education - Board of Governors 842,410,188 901,551,465 937,802,389 $996,080,552 $994,958,261

RI Council on the Arts 2,602,169 3,014,458 3,054,336 $3,072,855 $3,027,174

RI Atomic Energy Commission 1,119,073 1,141,723 1,492,350 $1,472,182 $1,511,526

Higher Education Assistance Authority 27,244,768 23,669,359 25,789,109 $27,516,773 $27,412,147

Historical Preservation and Heritage Comm. 2,021,139 1,901,211 2,663,971 $2,719,579 $2,826,017

Public Telecommunications Authority 1,923,277 1,607,931 1,672,717 $1,626,059 $1,781,172

Subtotal - Education $1,932,451,508 $2,012,980,258 $2,101,207,741 $2,205,718,843 $2,170,117,691

A-2

Expenditures from All FundsFY 2009 FY 2010 FY 2011 FY 2011 FY 2012


Public Safety

Attorney General 23,273,491 22,310,578 23,861,219 $25,176,626 $25,344,121

Corrections 179,135,561 173,870,935 187,181,519 $193,995,086 $198,975,598

Judicial 93,784,592 91,925,710 97,379,996 $99,199,016 $102,703,922

Military Staff 28,850,448 25,640,295 26,638,164 $61,539,354 $35,161,325

Public Safety (2) 78,958,901 98,996,111 86,749,570 $92,466,029 $102,344,254

Office Of Public Defender 9,272,215 9,124,681 10,020,401 $10,160,218 $10,876,941

Subtotal - Public Safety $413,275,208 $421,868,310 $431,830,869 $482,536,329 $475,406,161

Natural Resources

Environmental Management 66,566,249 64,770,868 93,120,711 $100,664,644 $97,582,385

Coastal Resources Management Council 3,607,015 5,623,950 4,383,711 $9,265,099 $4,954,375

Water Resources Board 1,132,330 1,235,380 1,436,540 $1,829,540 $1,430,267

Subtotal - Natural Resources $71,305,594 $71,630,198 $98,940,962 $111,759,283 $103,967,027

Transportation

Transportation 358,368,552 375,941,217 428,893,766 $450,858,459 $434,974,524

Subtotal - Transportation $358,368,552 $375,941,217 $428,893,766 $450,858,459 $434,974,524

Total $7,204,729,372 $7,708,933,707 $7,864,145,810 $8,111,360,471 $7,661,301,608

(1) In FY 2010 Fire Code Board was moved to Department of Adminsitration.

(2) Agencies merged with Department of Public Safety include State Police, Fire Marshal, E-911 Emergency Telephone System,

Municipal Police Training Academy,Capitol Police, and the Governor’s Justice Commission.

A-3

Expenditures from General RevenuesFY 2009 FY 2010 FY 2011 FY 2011 FY 2012


General Government

Administration (1) $475,081,231 $418,405,347 $324,063,375 $325,928,779 $250,047,213


Labor and Training 6,433,976 6,308,677 7,117,031 $7,005,613 $7,262,954

Revenue 32,332,042 32,476,057 35,479,085 $36,130,650 $91,720,012

Legislature 32,018,334 30,577,686 37,474,136 $36,970,091 $37,048,053

Lieutenant Governor 852,985 848,369 924,479 $889,100 $997,002

Secretary of State 6,318,528 5,142,947 6,908,707 $6,754,217 $6,434,744


Board of Elections 1,547,546 1,092,280 3,957,971 $3,219,832 $1,915,905

Rhode Island Ethics Commission 1,349,727 1,366,012 1,482,659 $1,454,869 $1,560,008

Governor's Office 4,627,388 4,344,370 4,752,606 $4,414,905 $4,338,521

Commission for Human Rights 918,461 959,253 1,014,978 $1,222,547 $1,154,038

Public Utilities Commission 0 - - $0 $0

Rhode Island Commission on Women 112,321 71,068 0 $0 $0

Subtotal - General Government $572,473,563 $511,743,070 $434,601,723 $435,163,572 $414,414,956

Human Services



Elderly Affairs 14,056,867 7,994,872 10,100,599 $9,648,239 $9,319,591

Health 26,238,748 25,221,245 27,624,903 $28,322,576 $26,748,244

Human Services 661,474,680 653,605,790 715,328,654 $736,566,357 $864,108,853




Commission On Deaf and Hard of Hearing 341,316 339,304 362,824 $364,802 $387,985

State Council on Developmental Disabilities - - - $0 $0


Office of the Mental Health Advocate 441,061 381,030 440,950 $438,733 $468,718


Education

Elementary and Secondary 826,168,088 803,066,786 856,068,541 $847,414,195 $869,014,643


RI Council on the Arts 1,591,482 1,615,295 1,668,346 $1,687,286 $1,619,110

RI Atomic Energy Commission 850,234 769,039 875,781 $861,031 $879,592


Historical Preservation and Heritage Comm. 1,241,496 1,256,875 1,348,717 $1,402,519 $1,501,641

Public Telecommunications Authority 1,206,333 1,000,695 1,035,967 $979,325 $1,097,960

Subtotal - Education $1,009,221,492 $975,428,570 $1,031,327,542 $1,022,237,736 $1,053,676,688

A-4

Expenditures from General RevenuesFY 2009 FY 2010 FY 2011 FY 2011 FY 2012


Public Safety


Corrections 154,269,705 169,892,046 178,329,401 $178,561,565 $188,141,365

Judicial 81,658,621 78,865,431 84,575,255 $84,392,428 $88,111,808

Military Staff 3,489,128 4,104,899 2,782,435 $4,166,145 $3,618,028

Public Safety (2) 63,138,452 54,155,469 67,024,490 $68,565,272 $89,407,711

Office Of Public Defender 8,986,912 9,013,466 9,590,261 $9,541,448 $10,300,580


Natural Resources



Water Resources Board 998,006 1,052,485 1,316,540 $1,298,362 $1,230,267


Transportation

Transportation - - - $0 $0

Subtotal - Transportation - - - - -

Total $3,001,184,552 $2,863,575,074 $2,942,118,704 $2,965,304,954 $3,169,836,026




A-5

Expenditures from Federal FundsFY 2009 FY 2010 FY 2011 FY 2011 FY 2012


General Government

Administration (1) $49,085,955 $57,534,460 $79,572,545 $103,620,313 $69,057,151

Business Regulation 87,315 0 - $758,454 $1,460,861


Revenue 1,551,480 1,803,123 2,289,770 $2,365,000 $2,636,059

Legislature - - - $0 $0

Lieutenant Governor - - - $0 $0

Secretary of State 285,132 397,172 100,000 $127,092 $0

General Treasurer 783,113 1,072,595 1,108,180 $1,115,608 $1,117,483

Board of Elections 495,324 109,931 0 $0 $50,000

Rhode Island Ethics Commission - - - $0 $0

Governor's Office 544,470 55,161 0 $132,605 $139,898

Commission for Human Rights 454,725 324,988 356,689 $164,367 $301,532

Public Utilities Commission 67,758 105,096 296,330 $296,330 $309,373

Rhode Island Commission on Women - - - $0 $0


Human Services



Elderly Affairs 13,297,603 16,491,994 15,936,066 $21,820,418 $17,769,466

Health 75,887,711 88,783,805 63,259,111 $102,553,414 $97,985,313

Human Services 1,167,517,155 1,364,253,707 1,556,245,695 $1,470,449,888 $1,359,554,881




Commission On Deaf and Hard of Hearing (3,900) 0 - $0 $0

State Council on Developmental Disabilitie 0 0 - $0 $0


Office of the Mental Health Advocate - - - $0 $0


A-6

Expenditures from Federal FundsFY 2009 FY 2010 FY 2011 FY 2011 FY 2012


Education



RI Council on the Arts 698,153 1,117,813 950,990 $950,569 $973,064



Historical Preservation and Heritage Comm 509,473 589,499 835,804 $841,508 $846,195

Public Telecommunications Authority - - - $0 $0

Subtotal - Education $231,089,315 $276,273,493 $269,116,853 $347,358,402 258,392,457

Public Safety


Corrections 22,288,289 2,106,693 2,794,860 $3,695,618 $2,914,545

Judicial 1,625,278 2,830,983 2,326,527 $3,937,011 $3,293,751

Military Staff 24,421,516 20,725,608 22,150,754 $54,794,249 $29,933,986

Public Safety (2) 7,925,797 18,591,398 7,131,554 $11,854,997 $6,541,865

Office Of Public Defender 285,303 111,215 430,140 $618,770 $576,361


Natural Resources



Water Resources Board (1,034) 0 - $0 $0


Transportation

Transportation $217,263,313 $242,296,127 $318,808,127 $340,116,026 $316,591,958


Total $2,270,817,275 $2,813,166,533 $2,903,497,922 $3,011,213,199 $2,557,164,416




A-7

Expenditures from Restricted ReceiptsFY 2009 FY 2010 FY 2011 FY 2011 FY 2012


General Government

Administration (1) $9,476,352 $19,964,401 $17,140,339 $25,689,655 $19,898,084



Revenue 4,479,106 4,001,548 824,191 $1,966,459 $21,191,727

Legislature 1,508,336 1,503,031 1,575,008 $1,575,314 $1,649,199


Secretary of State 428,119 459,582 494,567 $459,436 $496,548


Board of Elections - - - $0 $0


Governor's Office - 920,742 1,498,546 $719,684 $777,676

Commission for Human Rights - - - $0 $0

Public Utilities Commission 5,567,848 5,884,880 7,430,326 $7,418,690 $7,795,633



Human Services

Office of Health & Human Services 652,107 582,225 874,013 $891,857 $904,712


Elderly Affairs 850,000 740,000 675,931 $745,091 $397,091

Health 19,955,653 17,590,794 25,082,953 $25,869,684 $26,670,739

Human Services 5,923,903 8,158,484 9,446,201 $10,587,200 $11,873,994




Commission On Deaf and Hard of Hearing - - - $0 $0


Office of the Child Advocate - - - $0 $0


Subtotal - Human Services $34,318,443 $36,975,154 $49,088,273 $48,637,555 $55,068,514

Education


Higher Education - Board of Governors 651,932 738,830 930,000 $930,000 $941,338

RI Council on the Arts 83,440 100,000 - $0 $0

RI Atomic Energy Commission - - - $0 $0

Higher Education Assistance Authority - - - $0 $0

Historical Preservation and Heritage Comm. 270,170 54,837 479,450 $475,552 $478,181

Public Telecommunications Authority - - - $0 $0

Subtotal - Education $7,517,437 $16,688,636 $25,340,200 $20,425,435 $25,458,940

A-8

Expenditures from Restricted ReceiptsFY 2009 FY 2010 FY 2011 FY 2011 FY 2012


Public Safety

Attorney General 843,800 1,051,750 1,202,659 $1,317,657 $1,122,235

Corrections - - 87,134 $124,774 $34,371

Judicial 8,796,528 8,843,617 9,628,214 $10,018,790 $10,198,363

Military Staff 99,797 94,563 842,475 $376,782 $389,311

Public Safety (2) 243,806 942,338 803,106 $384,413 $335,749

Office Of Public Defender - - - $0 $0


Natural Resources


Coastal Resources Management Council 220,500 223,000 250,000 $250,000 $250,000

Water Resources Board 109,816 0 - $0 $0


Transportation

Transportation 370,418 757,110 1,000,000 $1,000,000 $1,000,000

Subtotal - Transportation $370,418 $757,110 $1,000,000 $1,000,000 $1,000,000

Total $127,764,753 $152,295,397 $180,035,096 $178,539,370 $209,472,234

$180,035,096

(1) In FY 2010 Fire Code Board was moved to Department of Adminsitration. ($29,437,138)



A-9

Expenditures from Other Funds

FY 2009 FY 2010 FY 2011 FY 2011 FY 2012


General Government

Administration (1) $56,759,074 $61,170,627 $78,523,550 $69,548,535 $76,040,239

Business Regulation - - - $0 $0


Revenue 189,839,846 231,073,323 197,737,371 $219,641,170 $220,347,938

Legislature - - - $0 $0


Secretary of State - - - $0 $0

General Treasurer 159,102 209,144 218,915 $227,153 $217,021

Board of Elections - - - $0 $0


Governor's Office - - - $0 $0

Commission for Human Rights - - - $0 $0

Public Utilities Commission - - - $0 $0



Human Services

Office of Health & Human Services - - - $0 $0

Children, Youth, and Families 573,923 402,032 4,390,000 $1,981,815 $3,090,000

Elderly Affairs 4,448,300 0 - $0 $0

Health 110,103 63,391 179,841 $116,200 $63,400

Human Services 32,500 4,752,781 4,285,000 $5,031,620 $4,455,357


Veterans Affairs 0 0 0 $0 $0


Commission On Deaf and Hard of Hearing - - - $0 $0


Office of the Child Advocate - - - $0 $0


Subtotal - Human Services $9,284,639 $8,817,988 $21,563,532 $19,243,564 $31,243,589

Education



RI Council on the Arts 229,094 181,350 435,000 $435,000 $435,000



Historical Preservation and Heritage Comm. - - - $0 $0

Public Telecommunications Authority 716,944 607,236 636,750 $646,734 $683,212

Subtotal - Education $684,623,264 $744,589,559 $775,423,146 $815,697,270 $832,589,606

A-10

Expenditures from Other Funds

FY 2009 FY 2010 FY 2011 FY 2011 FY 2012


Public Safety

Attorney General 220,879 369,577 200,000 $437,270 $250,000

Corrections 2,577,567 1,872,196 5,970,124 $11,613,129 $7,885,317

Judicial 1,704,165 1,385,679 850,000 $850,787 $1,100,000

Military Staff 840,007 715,225 862,500 $2,202,178 $1,220,000

Public Safety (2) 7,650,846 25,306,906 11,790,420 $11,661,347 $6,058,929

Office Of Public Defender - - - $0 $0


Natural Resources


Coastal Resources Management Council 0 1,655,509 0 $0 $429,100

Water Resources Board 25,542 182,895 120,000 $531,178 $200,000


Transportation

Transportation 140,734,821 132,887,980 109,085,639 $109,742,433 $117,382,566


Total $1,804,962,792 $1,879,896,703 $1,838,494,088 $1,956,302,948 $1,724,828,932




A-11

Full-Time Equivalent Positions

FY 2009 FY 2010 FY 2011 FY 2011 FY 2012Enacted Revised

General GovernmentAdministration 845.6 835.4 871.6 873.6 693.6 Business Regulation 91.0 85.5 90.0 93.0 93.0 Labor & Training 395.3 514.4 519.4 512.2 470.2 Revenue 410.0 413.5 426.0 428.5 428.5 Legislature 297.9 288.8 295.9 298.5 298.5 Office of the Lieutenant Governor 8.0 8.0 8.0 7.0 7.0 Secretary of State 55.0 56.5 57.0 57.0 57.0 General Treasurer 83.0 79.5 82.0 82.0 82.0 Boards for Design Professionals (4)Board Of Elections 12.0 11.5 12.0 11.0 12.0 Rhode Island Ethics Commission 12.0 12.0 12.0 12.0 12.0 Office of the Governor 39.0 44.0 45.0 45.0 45.0 Commission for Human Rights 14.5 14.2 14.5 14.5 14.5 Public Utilities Commission 44.0 45.5 46.0 46.0 46.0 Rhode Island Commission on Women 1.0 1.0 - - Subtotal - General Government 2,308.3 2,409.8 2,479.4 2,480.3 2,259.3

Human ServicesOffice of Health and Human Services 85.1 52.9 75.6 77.6 149.0 Children, Youth, and Families 694.0 658.5 691.0 691.0 662.5 Elderly Affairs 32.0 29.5 31.0 31.0 32.0 Health 409.6 397.4 410.7 468.7 473.3 Human Services 884.6 919.7 963.6 988.2 674.0 Veterans. Affairs - - - - 268.2 Behavioral Healthcare, Developmental Disabilities, and Hospitals 1,352.4 1,294.0 1,372.2 1,372.2 1,376.2 Office of the Child Advocate 5.7 5.8 5.8 5.8 5.8 Commission On the Deaf & Hard of Hearing 3.0 3.0 3.0 3.0 3.0 Governor's Commission on Disabilities 4.0 4.0 4.0 4.0 4.0 Office of the Mental Health Advocate 3.7 3.7 3.7 3.7 3.7 Subtotal - Human Services 3,474.1 3,368.5 3,560.6 3,645.2 3,651.7

EducationElementary and Secondary Education 128.4 129.7 133.4 156.4 156.4 Davies 133.0 128.5 132.0 132.0 132.0 School for the Deaf 50.0 57.6 60.0 60.0 60.0 Elementary Secondary Education - Total 311.4 315.8 325.4 348.4 348.4 Office of Higher Education Non-Sponsored Research 19.4 16.2 18.4 18.4 18.4 URI Non-Sponsored Research 1,849.9 1,814.4 1,834.5 1,834.5 1,834.9 RIC Non-Sponsored Research 812.6 805.2 810.1 810.1 827.2 CCRI Non-Sponsored Research 713.1 706.4 704.1 769.1 769.1 Higher Education - Total Non-Sponsored 3,395.0 3,342.2 3,367.1 3,432.1 3,449.6

A-12

Full-Time Equivalent Positions

FY 2009 FY 2010 FY 2011 FY 2011 FY 2012Enacted Revised

RI Council On The Arts 7.6 8.6 8.6 8.6 8.6 RI Atomic Energy Commission 8.6 8.6 8.6 8.6 8.6 Higher Education Assistance Authority 42.6 37.3 41.6 41.6 41.6 Historical Preservation and Heritage Commission 16.6 16.6 16.6 16.6 16.6 Public Telecommunications Authority 18.0 16.0 16.0 16.0 16.0 Subtotal - Education 3,799.8 3,745.1 3,783.9 3,871.9 3,889.4

Public SafetyAttorney General 231.1 230.0 231.1 231.1 231.1 Corrections 1,423.0 1,402.5 1,419.0 1,419.0 1,419.0 Judicial 729.3 699.7 723.3 723.3 723.3 Military Staff 101.0 109.0 111.0 117.0 117.0 Public Safety 396.1 418.6 423.1 423.2 603.2 Office of the Public Defender 91.0 92.0 93.0 93.0 93.0 Subtotal - Public Safety 2,971.5 2,951.8 3,000.5 3,006.6 3,186.6

Natural ResourcesEnvironmental Management 409.0 402.5 410.0 410.0 410.0 Coastal Resources Management Council 30.0 30.0 30.0 30.0 30.0 Water Resources Board 6.0 6.0 6.0 6.0 6.0 Subtotal - Natural Resources 445.0 438.5 446.0 446.0 446.0

TransportationTransportation 691.2 739.4 772.2 772.6 772.6 Subtotal - Transportation 691.2 739.4 772.2 772.6 772.6 Statwide Retirement Vacancies

Total Non Sponsored 13,689.9 13,653.1 14,042.6 14,222.6 14,205.6

Higher Education Sponsored Research *Office 1.0 1.0 1.0 1.0 1.0 CCRI 100.0 61.5 100.0 100.0 100.0 RIC 82.0 75.1 82.0 82.0 82.0 URI 602.0 550.1 602.0 602.0 602.0

Subtotal Sponsored Research 785.0 687.7 785.0 785.0 785.0

Total Personnel Authorizations 14,474.9 14,340.8 14,827.6 15,007.6 14,990.6

Total Personnel 14,474.9 14,340.8 14,827.6 15,007.6 14,990.6

*A total of 785.0 FTE positions in Higher Education in FY 2009 and FY 2010 represent FTE's supported by sponsored research funds. Commencing in FY2005, these positions were included in the overall FTE Cap. In addition, there are separate caps for each program and for sponsored/non-sponsored research FTE's. (1) Formerly Mental Health, Retardation and Hospitals

A-13

General Revenues as Recommended

FY 2009 FY 2010 FY 2011 FY 2012Audited Audited Revised Recommended

Personal Income Tax 940,513,781$ 898,113,113$ 936,500,000$ 950,004,002$

General Business TaxesBusiness Corporations 104,436,811 146,834,598 123,300,000 130,364,537 Public Utilities Gross Earnings 126,664,890 95,792,717 97,000,000 99,000,000 Financial Institutions 5,358,740 2,319,242 250,000 500,000 Insurance Companies 78,016,930 95,921,454 98,200,000 100,904,966 Bank Deposits 1,802,796 1,860,271 1,900,000 1,950,000 Health Care Provider Assessment 46,030,570 40,254,281 40,500,000 41,371,888

Sales and Use TaxesSales and Use 807,946,985 803,394,856 805,500,000 989,482,799 Motor Vehicle 47,925,805 48,285,182 51,800,000 42,100,000 Motor Fuel 1,325,034 968,870 1,100,000 1,100,000 Cigarettes 130,503,213 138,315,461 135,000,000 131,800,000 Alcohol 10,811,831 11,269,477 12,000,000 12,200,000

Other TaxesInheritance and Gift 28,096,912 29,056,952 28,300,000 28,900,000 Racing and Athletics 2,450,809 1,492,221 1,250,000 1,100,000 Realty Transfer 6,811,322 6,993,915 6,400,000 6,500,000

Total Taxes 2,338,696,429$ 2,320,872,609$ 2,339,000,000$ 2,537,278,192$

Departmental Receipts 318,804,246$ 333,128,045$ 334,797,880$ 344,580,999$

Taxes and Departmentals 2,657,500,675$ 2,654,000,655$ 2,673,797,880$ 2,881,859,191$

Other SourcesGas Tax Transfer 4,327,710$ 24,134$ -$ -$ Other Miscellaneous 17,813,994 12,466,517 13,123,285 7,290,000 Lottery 337,515,478 344,672,747 347,500,000 351,500,000 Unclaimed Property 8,044,126 5,867,150 5,300,000 5,200,000

Other Sources 367,701,308$ 363,030,548$ 365,923,285$ 363,990,000$

Total General Revenues 3,025,201,983$ 3,017,031,203$ 3,039,721,165$ 3,245,849,191$

A-14

Changes to FY 2011 Enacted Revenue Estimates

Enacted November Changes to TotalConsenus Changes Adopted Estimates

Personal Income Tax 937,900,000$ (1,400,000)$ -$ 936,500,000$

General Business TaxesBusiness Corporations 119,000,000 4,300,000 - 123,300,000 Public Utilities Gross 98,000,000 (1,000,000) - 97,000,000 Financial Institutions 1,000,000 (750,000) - 250,000 Insurance Companies 101,250,000 (3,050,000) - 98,200,000 Bank Deposits 2,200,000 (300,000) - 1,900,000 Health Care Provider 39,800,000 700,000 - 40,500,000

Sales and Use TaxesSales and Use 787,000,000 18,500,000 - 805,500,000 Motor Vehicle 48,500,000 3,300,000 - 51,800,000 Motor Fuel 1,000,000 100,000 - 1,100,000 Cigarettes 134,000,000 1,000,000 - 135,000,000 Alcohol 11,700,000 300,000 - 12,000,000

Other TaxesInheritance and Gift 27,600,000 700,000 - 28,300,000 Racing and Athletics 1,300,000 (50,000) - 1,250,000 Realty Transfer 6,900,000 (500,000) - 6,400,000

Total Taxes 2,317,150,000$ 21,850,000$ -$ 2,339,000,000$

Departmental Receipts 345,226,745$ (10,526,745)$ 97,880$ 334,797,880$

Total Taxes and Departmentals 2,662,376,745$ 11,323,255$ 97,880$ 2,673,797,880$

Other SourcesGas Tax Transfer -$ -$ -$ -$ Other Miscellaneous 5,331,000 5,524,000 2,268,285 13,123,285 Lottery 346,938,800 561,200 - 347,500,000 Unclaimed Property 6,000,000 (700,000) - 5,300,000

Other Sources 358,269,800$ 5,385,200$ 2,268,285$ 365,923,285$

Total General Revenues 3,020,646,545$ 16,708,455$ 2,366,165$ 3,039,721,165$

A-15

Changes to FY 2012 Adopted Revenue Estimates

Revenue Estimating Changes to TotalConference Estimates Adopted Estimates

Personal Income Tax 947,800,000$ 2,204,002$ 950,004,002$

General Business TaxesBusiness Corporations 131,000,000 (635,463) 130,364,537Public Utilities Gross 99,000,000 99,000,000Financial Institutions 500,000 500,000Insurance Companies 100,700,000 204,966 100,904,966Bank Deposits 1,950,000 1,950,000Health Care Provider 41,800,000 (428,112) 41,371,888

Sales and Use TaxesSales and Use 824,000,000 165,482,799 989,482,799Motor Vehicle 51,900,000 (9,800,000) 42,100,000Motor Fuel 1,100,000 1,100,000Cigarettes 131,800,000 131,800,000Alcohol 12,200,000 12,200,000

Other TaxesInheritance and Gift 28,900,000 - 28,900,000Racing and Athletics 1,100,000 - 1,100,000Realty Transfer 6,500,000 - 6,500,000

Total Taxes 2,380,250,000$ 157,028,192$ 2,537,278,192$

Departmental Receipts 197,300,000$ 147,280,999$ 344,580,999$

Total Taxes and Departmentals 2,577,550,000$ 304,309,191$ 2,881,859,191$

Other SourcesGas Tax Transfer -$ -$ -$ Other Miscellaneous 3,790,000 3,500,000 7,290,000Lottery 351,500,000 - 351,500,000Unclaimed Property 5,200,000 - 5,200,000

Other Sources 360,490,000$ 3,500,000$ 363,990,000$

Total General Revenues 2,938,040,000$ 307,809,191$ 3,245,849,191$

A-16

General Revenue Changes to Adopted Estimates

FY 2012Governor

Recommend

Taxes

Personal Income TaxesRepeal of Motion Picture Tax Credit Effective July 1, 2011 1,282,580$ Separate Posting of Individual Tax Delinquents 779,965Offset Lottery Winnings for Taxes Owed 141,457

Subtotal: Personal Income Taxes 2,204,002$

General Business TaxesBusiness Tax Competitiveness Proposal

Business Corporations: Phase Out of 1/3 of Value of Jobs Development Act 4,845,502$ Business Corporations: Implementation of Combined Reporting 8,891,640Business Corporations: Phase-In of First 0.5% of Rate Reduction from 9.0% to 7.5% (8,525,365)Business Corporations: Restructuring of Corporate Minimum Tax (6,117,310)

Subtotal: Business Tax Competitiveness Proposal (905,533)$

Business Corporations: Repeal of Motion Picture Tax Credit Effective July 1, 2011 139,655$ Business Corporations: Separate Posting of Business Tax Delinquents 130,415Insurance Companies: Repeal of Motion Picture Tax Credit Effective July 1, 2011 204,966Health Care Provider Assessment: Separate Posting of Business Tax Delinquents 275,888Health Care Provider Assessment: Reduce Nursing Home Expenditure Base (704,000)

Subtotal: General Business Taxes (858,609)$

Sales and Excise Taxes Sales Tax Modernization Proposal

Sales and Use: Reduce Sales Tax Rate from 7.0% to 6.0% (117,714,286)$ Sales and Use: Modernization of Sales Tax Base at 6.0% Sales Tax Rate 195,908,719Sales and Use: Impose 1.0% Tax on Certain Exempt Items 86,840,462Sales and Use: Lost Revenues from Non-Compliance with Streamlined Sales and Use Tax Agreement (1,840,011)

Sales and Use: Impose Tax on Retail Sale of Medical Marijuana at 6.0% Sales Tax Rate 802,659Sales and Use: No Insurance Proceeds for Totaled or Stolen Motor Vehicle as Trade-In Value 882,857

Subtotal: Sales Tax Modernization Proposal 164,880,400$

Sales and Use: Separate Posting of Business Tax Delinquents 602,399$ Motor Vehicle: Increase Dealer Temporary Plate Fees for Online Access 0Motor Vehicle: Disallow General Plate Reissuance [1,593,649]Motor Vehicle: Phase-In Transfer of Registration and Licenses Fees to to DOT (9,800,000)

Subtotal: Sales and Excise Taxes 155,682,799$

Subtotal: All Taxes 157,028,192$

A-17

General Revenue Changes to Adopted Estimates

Departmental RevenuesGovernor

Recommend

Licenses and FeesDEM: Increase Beach Parking Fees 1,897,106$ DBR: Increase Securities Sales Rep License Fee to $75 1,183,440DBR: Increase Federal Covered Advisor Fee to $300 41,000DMV: Require Driving Record Abstracts Every 3 Years 2,965,689DMV: NSF Check Return Fee of $25 18,720DMV: Phase-In Transfer of Commercial Driver License Fees to DOT (74,902)DMV: Phase-In Transfer of Registration Reinstatement Fees to DOT (166,489)DMV: Phase-In Transfer of Driver License Reinstatement Fees to DOT (677,486)DMV: Phase-In Transfer of Motor Vehicle Title Fees to DOT (1,303,219)DMV: Temporary Licese Plate Fee Restructure 0DOR: Increase Estate Tax Filing Fee to $50 108,915DOR: Increase Letter of Good Standing Fee to $50 122,925DOR: Impose 4.0% Surcharge on Compassion Center Net Revenues 556,092DHS: Reinstitute Hospital Licensing Fee at 5.465% on FY 2009 Net Patient Revenues 141,816,544DPS: Increase Fee for Fire Code Violations to $125 40,000DOH: Dissolution of Health Services Council (371,320)DCYF: Institute $10 Fee for Background Clearances 110,000

Subtotal: Licenses and Fees 146,267,015$

Sales and ServicesDOC: Offset Income Tax Refunds for Probabtion and Parole Fees Owed 153,576$ DVA: Increase Veteran Home Assessment to 100.0 percent of Countable Income 786,248

Subtotal: Sales and Services 939,824$

MiscellaneousIndirect Cost Recovery: Telecommunication Education Access Fund 74,160$

Subtotal: Miscellaneous 74,160$

Subtotal: Departmental Revenues 147,280,999$

Subtotal: Taxes and Departmental Revenues 304,309,191$

Other SourcesOther Miscellaneous

Rhode Island Resource Recovery Corporation Transfer 3,500,000$

Subtotal: Other Miscellaneous 3,500,000$

Subtotal: Other Sources 3,500,000$

Total FY 2012 General Revenue Adjustments 307,809,191$

A-18

Other Revenue Enhancements

Governor Recommend

FY 2012Other Sources

Phase in Transfer of Motor Vehicle Fees to the Intermodal Service Transportation Fund for DOT 12,022,096$

Subtotal: Other Sources 12,022,096$

Restricted ReceiptsMaintain Meals & Beverage Tax at 8.0% for Municipal Accountability, Stability & Transparency Fund 19,330,231$ Retain Room and Lodging Rental Tax at 8.0% for the Tourism Asset Protection Fund 2,620,180Increase the Maximum Amount of Services Covered under the Children's Health Account to $7,500 4,218,995 Require Local Education Agencies to Pay Education Costs at Training School 2,075,000 Reduce Wireline Monthly Surcharge from $0.26 to $0.15 per line for Telecom Ed Access Fund (591,480) Impose Wireless Monthly Surcharge of $0.15 per line for Telecom Ed Access Fund 1,258,920 Require Local Education Agencies to Pay Student Cost at William M. Davies School 685,495 Increase Veteran's Home Assessment Fee to 100.0 percent of Countable Income 196,562 Dissolution of Health Services Council (125,000)

Subtotal: Restricted Receipts 29,668,903$

Total FY 2012 Other Revenue Adjustments 41,690,999$

A-19

Appendix B Changes to FY 2011

Changes to FY 2011 General Revenue Budget SurplusFY2009 FY2010 FY2011 FY2011 ChangeAudited Audited (1) Enacted (2) Revised (3) From Enacted

SurplusOpening Surplus ($42,950,480) ($62,286,103) $14,216 $17,889,522 $17,875,305Reappropriated Surplus 1,738,518 998,143 - 3,364,847 $3,364,847

Subtotal ($41,211,962) ($61,287,960) $14,216 $21,254,369 $21,240,152

General Taxes 2,338,696,429 2,320,872,610 2,317,150,000 2,317,150,000 - Revenue estimators' revision 21,850,000 21,850,000 Changes to the Adopted Estimates - -

Subtotal $2,338,696,429 $2,320,872,610 $2,317,150,000 $2,339,000,000 $21,850,000Departmental Revenues 318,804,246 333,128,045 345,226,745 345,226,745 -

Revenue estimators' revision - (10,526,745) (10,526,745) Changes to the Adopted Estimates - 97,880 97,880

Subtotal $318,804,246 $333,128,045 $345,226,745 $334,797,880 ($10,428,865)Other Sources

Gas Tax Transfers 4,327,710 24,134 - - - Revenue estimators' revision - - - - Changes to the Adopted Estimates - - - - Other Miscellaneous 17,813,994 12,466,517 5,331,000 5,331,000 - Rev Estimators' revision-Miscellaneous - 5,524,000 5,524,000 Changes to the Adopted Estimates - 2,268,285 2,268,285 Lottery 337,515,478 344,672,747 346,138,520 346,138,520 - Revenue Estimators' revision-Lottery - 1,361,480 1,361,480 Changes to the Adopted Estimates - - - Unclaimed Property 8,044,126 5,867,150 6,000,000 6,000,000 - Revenue Est revision-Unclaimed Property - (700,000) (700,000)

Subtotal $367,701,308 $363,030,548 $357,469,520 $365,923,285 $8,453,765

Total Revenues $3,025,201,983 $3,017,031,203 $3,019,846,265 $3,039,721,165 $19,874,900Transfer to Budget Reserve (66,093,533) (70,913,882) (78,516,373) (79,497,878) ($981,505)

Total Available $2,917,896,488 $2,884,829,361 $2,941,344,109 $2,981,477,656 $40,133,547

Actual/Enacted Expenditures $3,001,184,448 $2,863,574,992 $2,942,118,704 $2,942,118,704 $0Reappropriations - - 3,364,847 3,364,847 Caseload Conference Changes (9,507,723) (9,507,723) FMAP Makeup 37,289,357 37,289,357 Other Changes in Expenditures (7,960,231) (7,960,231)

Total Expenditures $3,001,184,448 $2,863,574,992 $2,942,118,704 $2,965,304,954 $23,186,250

Free Surplus ($62,286,104) $17,889,522 ($774,595) $16,172,702 $16,947,297$22,000,000

Reappropriations (998,144) (3,364,847) - - Total Ending Balances ($83,287,960) $21,254,369 ($774,595) $16,172,702 $16,947,297

Budget Reserve and Cash Stabilization Account $80,144,551 $112,280,314 $126,834,140 $128,419,649 $1,585,509

(1)Derived from the State Controller's final closing report for FY 2010, dated January 13, 2011, reflecting a surplus of $17,889,522.(2) Reflects the final FY 2011 budget enacted by the General Assembly in June 2010, reflecting the revenue estimates adopted at the May 2010 Revenue Estimating Conference and further modified by legislative changes in the enacted budget. Legislation approved separate from the budget, which impacted VLT revenues, reduced lottery revenues by $800,280.

(3) Reflects the enacted revenues and expenditures adjusted for revenue and caseload estimates adopted at the November 2010 Revenue and Caseload Estimating Conferences and adjustments to revenues and expenditures recommended by the Governor.

B-1

Changes to FY 2011 Enacted Agency General Revenue Expenditures FY2011 Enacted Reappropriation/ FY 2011 Projected Appropriation Appropriation Projected Projected Surplus/

Transfer Changes Expenditures (Deficit)

General GovernmentAdministration

Central Management 1,475,743Personnel-Salary & Benefits 123,777 Contracted Professional Services (1,000)Operating Supplies and Expenses 3,398 1,475,743 - 126,175 1,601,918 (126,175)

Legal Services 1,653,248

Personnel-Salary & Benefits 1,156 Contracted Professional Services 11,500 Operating Supplies and Expenses (1,453) Capital Purchases and Equipment (2,116)

1,653,248 - 9,087 1,662,335 (9,087)

Accounts & Control 3,806,968Personnel-Salary & Benefits (138,661) Operating Supplies and Expenses 7,000 Contracted Professional Services 29,554 Grants and Benefits (417)

3,806,968 - (102,524) 3,704,444 102,524

Budgeting 2,007,066Personnel-Salary & Benefits (81,689) Operating Supplies and Expenses 10,057 Capital Purchases and Equipment (2,472)

2,007,066 - (74,104) 1,932,962 74,104

Purchasing 2,281,261Personnel-Salary & Benefits (206,253) Contracted Professional Services 50,150 Operating Supplies and Expenses 587 Capital Purchases and Equipment 1,089

2,281,261 - (154,427) 2,126,834 154,427

Auditing 1,287,300Personnel-Salary & Benefits (23,894) Operating Supplies and Expenses (12,054) Capital Purchases and Equipment (5,000)

1,287,300 - (40,948) 1,246,352 40,948

Human Resources 8,751,900Personnel-Salary & Benefits - Corporate (425,316) Personnel-Salary & Benefits - Service Center (141,055) Contracted Professional Services 48,908 Operating Supplies and Expenses 43,755 Capital Purchases and Equipment (7,098)

8,751,900 - (480,806) 8,271,094 480,806

Personnel Appeal Board 80,803Personnel-Salary & Benefits 34 Operating Supplies and Expenses (659)

80,803 - (625) 80,178 625

Facilities Management 31,912,385Personnel-Salary & Benefits- Capital (173,138) Personnel-Salary & Benefits- Centralization (112,792) Contracted Professional Services 193,825 Operating Supplies and Expenses-Capital 25,199 Operating Supplies and Expenses- Centralization 159,409

B-2



Utility Costs - Capital (524,117) Utility Costs - Centralization 222,934 Capital Purchases and Equipment 1,667 Grants and Benefits 171

31,912,385 - (206,842) 31,705,543 206,842

Capital Projects and Property Management 2,582,383Personnel-Salary & Benefits (45,697) Contracted Professional Services 53,150 Operating Supplies and Expenses (1,384)

2,582,383 - 6,069 2,588,452 (6,069)

Information Technology 19,226,491Personnel-Salary & Benefits (136,916) Contracted Professional Services 19,220 Operating Supplies and Expenses (142,841) Capital Purchases and Equipment (3,674) Grants and Benefits 677

19,226,491 - (263,534) 18,962,957 263,534

Library and Information Services 886,847Personnel-Salary & Benefits 16,551 Contracted Professional Services (3,000) Operating Supplies and Expenses (10,995)

886,847 - 2,556 889,403 (2,556)

Statewide Planning 3,331,033Personnel-Salary & Benefits (93,352)

3,331,033 - (93,352) 3,237,681 93,352

Sheriffs 16,341,206Personnel-Salary & Benefits (224,024) Contracted Professional Services 5,480 Operating Supplies and Expenses (55,765) Capital Purchases and Equipment (500) Grants and Benefits 500

16,341,206 - (274,309) 16,066,897 274,309

Energy Resources 0 - Personnel-Salary & Benefits 104,856 Contracted Professional Services -

0 - 104,856 104,856 (104,856)General

Operating Supplies and Expenses Economic Development Corp. 5,500,807EHC-RI Airport Corp. Impact Act 1,025,000EHC EPScore (Research Alliance) 1,500,000Miscellaneous Grants 395,956Transition costs for elected officials 100,000 (100,000) Slater Centers for Excellence 2,000,000Torts 400,000Transfer to R.I. Capital Plan Fund 22,000,000 (22,000,000) State/Teachers' Retiree Health Subsidy 2,344,502 (11,723) Motor Vehicle Excise Tax Payment 10,000,000Central Falls Stabilization Payment 0 1,800,000 Property Revaluation Program 1,000,000 (210,000) Payment in Lieu of Tax Exempt 27,580,409Distressed Communities Relief 10,384,458 5,192,229 Resource Sharing and State Library Aid 8,773,398Library Construction Aid 2,492,974

B-3



95,497,504 - (15,329,494) 80,168,010 15,329,494

Debt Service Payments 138,595,566 - General Obligation Bonds 16,265,340 Historic Structures Tax Credit (2,625,000) Certificates of Participation (1,722,947) Performance Based Debt 904,054 Other (18,797) TANS Net Interest Costs ($350 million issuance) 510,091

138,595,566 - 13,312,741 151,908,307 (13,312,741)

Pension Changes (5,654,329) 5,654,329 Pharmacy Savings (43,212) Statewide Adjustments (286,232)

(5,654,329) - 5,324,885 (329,444) (5,324,885)

Total 324,063,375 - 1,865,404 325,928,779 (1,865,404)

Business Regulation Central Management 1,024,858

Personnel-Salary & Benefits 40,639 Contracted Professional Services Operating Supplies and Expenses

1,024,858 - 40,639 1,065,497 (40,639)

Insurance Regulation 4,439,718Personnel-Salary & Benefits (191,400) Contracted Professional Services 31,973 Operating Supplies and Expenses

4,439,718 - (159,427) 4,280,291 159,427

Board of Accountancy 164,031Personnel-Salary & Benefits -Contracted Professional Services Operating Supplies and Expenses

164,031 - - 164,031 0

Banking 1,696,156Personnel-Salary & Benefits (175,512) Contracted Professional Services Operating Supplies and Expenses

1,696,156 - (175,512) 1,520,644 175,512

Securities 839,862Personnel-Salary & Benefits 31,676 Operating Supplies and Expenses

839,862 31,676 871,538 (31,676)

Commercial Licensing, Racing & Athletics 735,531Personnel-Salary & Benefits 429 Contracted Professional Services Operating Supplies and Expenses

735,531 - 429 735,960 (429)

Board of Design Professionals 255,891Personnel-Salary & Benefits 61,984 Contracted Professional Services Operating Supplies and Expenses

255,891 - 61,984 317,875 (61,984)

B-4



Statwide Adjustments (36,481)

Total 9,156,047 - (236,692) 8,919,355 236,692

Labor and Training Central Management 127,131

Personnel-Salary & Benefits 11,346 Contracted Professional Services (22,238) Operating Supplies and Expenses (2,611) Assistance and Grants (2) Capital Purchases and Equipment 36

127,131 - (13,469) 113,662 13,469

Workforce Development 65,119Personnel-Salary & Benefits (62,335) Contracted Professional Services - Operating Supplies and Expenses (2,784)

65,119 - (65,119) - 65,119

Workforce Regulation and Safety 2,404,353Personnel-Salary & Benefits 150,548 Contracted Professional Services (26,918) Operating Supplies and Expenses (19,241) Assistance and Grants (798) Capital Purchases and Equipment 6,766

2,404,353 - 110,357 2,514,710 (110,357)

Income Support 4,117,831Personnel-Salary & Benefits (10,921) Contracted Professional Services 77 Operating Supplies and Expenses (1,861) Assistance and Grants (101,160) Capital Purchases and Equipment 30

4,117,831 - (113,835) 4,003,996 113,835

Labor Relations Board 402,597Personnel-Salary & Benefits (22,572) Contracted Professional Services (10,532) Operating Supplies and Expenses (2,181) Assistance and Grants (22) Capital Purchases and Equipment 12,505

402,597 - (22,802) 379,795 22,802

Statewide Adjustments (6,550)

Total 7,117,031 - (111,418) 7,005,613 111,418

Legislature 37,474,136 3,364,847 (3,364,847)

General AssemblyPersonnel-Salary & Benefits (39,282) Contracted Professional Services 18,550 Redistricting 300,000 Operating Supplies and Expenses 160,850 Capital (2,500)

437,618 Fiscal Advisory Staff

Personnel-Salary & Benefits 78,313

B-5



Operating Supplies and Expenses (9,125) Capital (12,500)

56,688 Legislative Council

Personnel-Salary & Benefits 21,772 Operating Supplies and Expenses 650 Capital (1,300)

21,122 Joint Committee on Legislative Affairs

Personnel-Salary & Benefits 191,791 Contracted Professional Services (1,417,200) Operating Supplies and Expenses 2,750 Assistance & Grants 600,000 Capital (6,000)

(628,659) Auditor General

Personnel-Salary & Benefits (215,948) Contracted Professional Services 2,482 Operating Supplies and Expenses (19,845) Capital (775)

(234,086)

Staewide Adjustments (156,728) Total 37,474,136 3,364,847 (3,868,892) 36,970,091 504,045

Office of the Lieutenant Governor 924,479

Personnel-Salary & Benefits (45,975) Contracted Professional Services 500 Operating Supplies and Expenses/Capital 10,096

Total 924,479 - (35,379) 889,100 35,379

Secretary of StateAdministration 1,943,053

Personnel-Salary & Benefits 9,711 Contracted Professional Services 500 Operating Supplies and Expenses 1,243

1,943,053 - 11,454 1,954,507 (11,454)

Corporations 2,070,271Personnel-Salary & Benefits 43,898 Contracted Professional Services (225) Operating Supplies and Expenses 5,773

2,070,271 - 49,446 2,119,717 (49,446)

State Archives 80,084Personnel-Salary & Benefits - Operating Supplies and Expenses 31,214

80,084 - 31,214 111,298 (31,214)

Elections 1,913,831Personnel-Salary & Benefits (149,705) Contracted Professional Services (78,624) Operating Supplies and Expenses (2,795)

1,913,831 (231,124) 1,682,707 231,124

State Library 571,887Personnel-Salary & Benefits 3,880 Operating Supplies and Expenses (100)

571,887 - 3,780 575,667 (3,780)

B-6



Office of Civics and Public Information 329,581Personnel-Salary & Benefits 2,740 Contracted Professional Services - Operating Supplies and Expenses 427

329,581 - 3,167 332,748 (3,167)


Total 6,908,707 - (154,490) 6,754,217 154,490

Office of the General Treasurer Treasury 2,183,087

Personnel-Salary & Benefits (121,219) Operating 7,239 Consultants 7,000 New Servers - All Divisions 5,000 50 Service Avenue - Delay in Relocation 26,260 50 Service Avenue - Pre-Move Expenses 22,778 Transition - Lease & Personnel 37,044

2,183,087 (15,898) 2,167,189 15,898

Crime Victim Compensation Program 87,562Personnel-Salary & Benefits (3,665) Operating Supplies and Expenses 3,790

87,562 125 87,687 (125)


Total 2,270,649 - (17,035) 2,253,614 17,035

Board of ElectionsBoard Of Elections 1,847,971

Personnel-Salary & Benefits (132,611) Contracted Professional Services (158,338) Operating/Presidential Preference Primary (108,900) Assistance and Grants (344,290) Capital Purchases and Equipment 6,000 Public Financing of General Elections 2,110,000 -

Total 3,957,971 - (738,139) 3,219,832 738,139

R I Ethics CommissionsRI Ethics Commission 1,482,659

Personnel-Salary & Benefits (19,448) Contracted Professional Services - Operating Supplies and Expenses (9,667) Capital Purchases and Equipment 1,325

Total 1,482,659 - (27,790) 1,454,869 27,790

Office of the Governor 4,502,606Personnel-Salary & Benefits (444,726) Operating /Contracted Services (7,000) Transition 126,645 Contingency Fund 250,000 - Statewide Adjustments (12,620)

B-7



Total 4,752,606 - (337,701) 4,414,905 337,701

Commission for Human Rights 1,014,978 Personnel-Salary & Benefits 18,136 Federal Funds Deficiency/GR Offset 189,433

Total 1,014,978 - 207,569 1,222,547 (207,569)

Public Utilities CommissionPublic Utilities Commission - - - - -

Total - - - - -

Department of RevenueDirector of Revenue 500,231

Personnel-Salary & Benefits 95,569 Contracted Professional Services Operating Supplies and Expenses 100

500,231 0 95,669 595,900 (95,669)

Office of Revenue Analysis 555,607Personnel-Salary & Benefits (128,069) Contracted Professional Services 40,000 Operating Supplies and Expenses 13,950 Capital Purchases and Equipment (54,600)

555,607 0 (128,719) 426,888 128,719

Office of Municipal Finance 1,159,585Personnel-Salary & Benefits (59,281) Contracted Professional Services Operating Supplies and Expenses (1,571) Grants and Benefits 46,604

1,159,585 0 (14,248) 1,145,337 14,248

Receivership Central Falls 0Personnel-Salary & Benefits 199,457 Contracted Professional Services 742,000 Operating Supplies and Expenses 4,338

0 0 945,795 945,795 (945,795)

Taxation 16,726,289Personnel-Salary & Benefits (370,711) Contracted Professional Services (136,880) Operating Supplies and Expenses 150,995 Assistance & Grants

16,726,289 0 (356,596) 16,369,693 356,596

Registry 16,537,373Personnel-Salary & Benefits 22,591 Contracted Professional Services (37,830) Operating Supplies and Expenses 171,931 DMV Personnel Overtime 161,475 Grants and Benefits (1,587) Capital Purchases and Equipment (41,000)

16,537,373 0 275,580 16,812,953 (275,580)


Total 35,479,085 0 651,565 36,130,650 (651,565)

B-8



Sub-Total General Government 434,601,723 3,364,847 (2,802,998) 435,163,572 (561,849)

Human Services

Office of Health and Human Services 3,420,163Personnel-Salary & Benefits 166,210 Contracted Professional Services (2,200) Operating Supplies and Expenses (25,270) Statewide Adjustments (17,791)

3,420,163 - 120,949 3,541,112 (120,949)

Children, Youth, and Families Central Management 4,451,118

Personnel-Salary & Benefits 130,777Contracted Professional Services (104,851) Operating Supplies and Expenses (17,322) Rental of Outside Property (344,578)

4,451,118 - (335,974) 4,115,144 335,974

Children's Behavioral Health 11,706,718Personnel-Salary & Benefits (100,904) Operating Supplies and Expenses (5,561) Grants and Benefits (1,159,847) Rental of Outside Property 17,945

11,706,718 - (1,248,367) 10,458,351 1,248,367

Juvenile Corrections 31,886,768Personnel-Salary & Benefits (1,200,498) Overtime 855,991 Contracted Professional Services 110,297 Operating Supplies and Expenses (159,547) Grants and Benefits 435,771 Rental of Outside Property (56,565)

31,886,768 - (14,551) 31,872,217 14,551

Child Welfare 95,697,21818 to 21 Year Olds 9,104,273Personnel-Salary & Benefits (2,596,535) Overtime 157,963 Contracted Professional Services (13,008) Operating Supplies and Expenses (268,518) Rental of Outside Property 566,091 Grants and Benefits 5,928,956 Residential Reduction (2,058,883)

104,801,491 - 1,716,066 106,517,557 (1,716,066)

Higher Education Opportunity Incentive Grant 200,000200,000 - - 200,000 0


Total 153,046,095 - (172,646) 152,873,449 172,646

Elderly Affairs Elderly Affairs 8,758,124

Personnel-Salary & Benefits (73,938) Operating Supplies and Expenses 100 Final Medicaid Financing Ratios (527,671) Stimulus Restoration 149,149

B-9



RIPAE 1,341,175 - Safety & Care of the Elderly 1,300

Total 10,100,599 - (452,360) 9,648,239 452,360

Health Central Management 1,604,353

Personnel-Salary & Benefits 13,338 Contract Professional Services (Temps) (12,679) Operating Supplies and Expense (Incl Subscrip) (69,872)

1,604,353 - (69,213) 1,535,140 69,213

State Medical Examiner 2,056,373Personnel-Salary & Benefits (152,296) Contract Services - Doctors, Medical & Clerical 253,732 Medical & Other Supplies (139,068) Post-station Fire - Recovery & Mitigation Svcs 79,000

2,056,373 - 41,368 2,097,741 (41,368)

Environmental & Health Services Regulations 8,411,277Personnel-Salary & Benefits (311,449) Contract Professional Services (Temps, Clerical) 338,004 Contract Professional Services (Legal - IL, CEC, CON, HCA) 135,000 Exams Testing Fees 16,795 Operating Supplies and Expense 279,993

8,411,277 - 458,343 8,869,620 (458,343)

Health Laboratories 7,050,149Personnel-Salary & Benefits 181,247 Medical Billing Service Contract 65,000 Clerical and Temporary Services 27,517 Specialized Toxicology Services 30,000 Other Contract Professional Services (322,691) Laboratory Information Management System 179,000 Operating Supplies and Expense (265,343)

7,050,149 - (105,270) 6,944,879 105,270

Public Health Information 1,909,149Personnel-Salary & Benefits (116,955) Contract Professional Services (97,378) Operating Supplies and Expenses 68,979

1,909,149 - (145,354) 1,763,795 145,354

Community & Family Health and Equity 4,324,134Personnel-Salary & Benefits 272,051 Contract Professional Services 147,894 Operating Supplies & Expense (82,413) HIV Program - Formulary and Services 536,387 Women Cancer Screening - Direct Services 70,000

4,324,134 - 943,919 5,268,053 (943,919)

Infectious Disease and Epidemiology 2,269,468Personnel-Salary & Benefits (108,880) Contract Professional Services 59,146 Operating Supplies and Expense (374,902) Third Party Converted Funding - IHS Project 97,878

2,269,468 - (326,758) 1,942,710 326,758


B-10



Total 27,624,903 - 697,673 28,322,576 (697,673)

Human ServicesCentral Management 5,144,596

Personnel- Salary & Benefits 1,065,642 Contracted Professional Services 3,000 Operating Supplies and Expenses (5,056) Grants and Benefits (51,761)

5,144,596 - 1,011,825 6,156,421 (1,011,825)

Child Support Enforcement 2,358,873Personnel- Salary & Benefits (88,911) Contracted Professional Services (11,467) Operating Supplies and Expenses 21,678

2,358,873 - (78,700) 2,280,173 78,700

Individual and Family Support 22,152,712Personnel- Salary & Benefits (2,262,685) SSI State Administration- Personnel 170,564 SSI State Administration- Contract Services 302,002 SSI State Administration- Operating 68,948 Other Contracted Professional Services 40,909 Other Operating Supplies and Expenses 49,356 ORS- Client Services 117,644 Grants and Benefits (8,238)

22,152,712 - (1,521,500) 20,631,212 1,521,500

Veterans' Affairs 19,437,637Personnel- Salary & Benefits 64,052 Contracted Professional Services 442,450 Operating Supplies and Expenses 183,663 Grants and Benefits (1,000)

19,437,637 - 689,165 20,126,802 (689,165)

Health Care Quality, Financing and Purchasing 21,047,376Personnel- Salary & Benefits 225,285 Contracted Professional Services 167,160 Operating Supplies and Expenses (38,475) Grants and Benefits 2,000

21,047,376 - 355,970 21,403,346 (355,970)

Medical Benefits 614,441,892Managed Care- Caseload Estimating Conference (8,644,137) Hospitals- Caseload Estimating Conference (1,644,391) Other- November - Caseload Estimating Conference (2,668,950) Nursing Facilities- Caseload Estimating Conference 5,111,908 H&CBS- Caseload Estimating Conference 676,890 Pharmacy- Caseload Estimating Conference (699,279) Rhody Health- Caseload Estimating Conference (1,639,764) Additional Financing- Partial Loss of FMAP Enhancement (CEC) 28,333,668 FY 2011 Constrained MA Initiatives (1,421,236)

614,441,892 - 17,404,709 631,846,601 (17,404,709)

S.S.I. Program 19,310,887Caseload Estimating Conference 1,326,513

19,310,887 1,326,513 20,637,400 (1,326,513)

Family Independence Program Child Care 8,780,999

B-11



Caseload Estimating Conference 2,289,536 8,780,999 - 2,289,536 11,070,535 (2,289,536)

State Funded Programs 2,653,682Caseload Estimating Conference (6,528) GPA- Cash Assistance Hardship Program (25,300)

2,653,682 - (31,828) 2,621,854 31,828


Total 715,328,654 - 21,237,703 736,566,357 (21,237,703)

Behavioral Health, Developmental Disabilities & HospitalsCentral Management 795,281

Personnel-Salary & Benefits 110,886 Contracted Professional Services (16,152) Operating Supplies and Expenses (31,247) Grants - Supplemental Pensions (550) Capital - Computer Equip (73,515)

795,281 - (10,578) 784,703 10,578

Hosp. & Community System Support 1,829,075Personnel-Salary & Benefits 28,634 Contracted Professional Services (23,627) Operating Supplies and Expenses (23,252) Grants - Supplemental Pensions 29 Capital Purchases and Equipment (6,100)

Total 1,829,075 - (24,316) 1,804,759 24,316

Services. for the Developmentally Disabled 81,508,130Personnel-Salary & Benefits 414,422 Overtime 500,419 Contracted Professional Services 350,156 Operating Supplies and Expenses 233,725 Grants - Provider Payments 4,428,094 Capital Purchases and Equipment (7,656)

81,508,130 - 5,919,160 87,427,290 (5,919,160)

Integrated Mental Health Services 41,614,835Personnel-Salary & Benefits (13,586) Contracted Professional Services (20,480) Operating Supplies and Expenses (21,166) Assistance and Grant 813,173

41,614,835 0 757,941 42,372,776 (757,941)

Hosp. & Community Rehab. Services 37,936,923Personnel-Salary & Benefits 192,332 Overtime 2,653,327 Contracted Professional Services (45,167) Operating Supplies and Expenses (1,555,373) Grants and Assistance - Medical Services (362,645)Capital Purchases and Equipment 8,868

37,936,923 - 891,342 38,828,265 (891,342)


Total 163,684,244 - 7,244,796 170,929,040 (7,244,796)

B-12



Office of the Child Advocate 543,822Personnel-Salary & Benefits 16,309 Operating Supplies and Expenses (4,084)

Total 543,822 - 12,225 556,047 (12,225)

Commission on Deaf and Hard of Hearing 362,824Personnel- Salary & Benefits 2,928 Contracted Professional Services Operating Supplies and Expenses (950)

Total 362,824 - 1,978 364,802 (1,978)

Governor's Commission on Disabilities 367,229Personnel-Salary & Benefits 5,808

Contracted Professional Services (769) Operating Supplies and Expenses (1,289) Grants and Benefits (7,671)

Total 367,229 - (3,921) 363,308 3,921

Office of the Mental Health Advocate 440,950Personnel-Salary & Benefits (373) Contracted Professional Services (450) Operating Supplies and Expenses - (1,394)

Total 440,950 - (2,217) 438,733 2,217

Sub-Total Human Services 1,074,919,483 - 28,684,180 1,103,603,663 (28,684,180)

Education

Elementary and Secondary EducationState Education Aid 614,888,594

Statewide Transportation - Across-the-board cut-Local Districts - State Support Local School Operations - Shift to Stabilization Funding-Local Districts - Charter School Aid 280,658 Progressive Support and Intervention - Transfers to Central Falls - Shift to Stabilization Funding-Charter Schools - School Breakfast -

Contracted Professional Services - Operating Supplies and Expenses - Group Home aid 30,000 Non-public textbook aid 1,490 Transfer from ACES for Pre-K Demo Project 700,000 E-Rate -

614,888,594 - 1,012,148 615,900,742 (1,012,148)

School Housing Aid 70,774,727 (2,751,718) 70,774,727 - (2,751,718) 68,023,009 2,751,718

Teachers' Retirement 75,598,212Base adjustment (5,944,919) Pension Reform -

75,598,212 - (5,944,919) 69,653,293 5,944,919

B-13



RI School for the Deaf 6,032,357Personnel (103,345) Contracted Professional Services (76,308) Operating Supplies and Expenses 94,653 Shift to Stabilization Funding 4,122

6,032,357 - (80,878) 5,951,479 80,878

Central Falls School District 41,774,118Across-the-board cut - Aid to Locals - Pension reform - Shift to Stabilization Funding -

41,774,118 - - 41,774,118 0

Davies Career & Technical School 14,320,912Personnel (156,980) Contracted Professional Services 20,050 Operating Supplies and Expenses 136,930 Flood Damage (25%) - Capital Purchases and Equipment - Shift to Stabilization Funding -

14,320,912 - - 14,320,912 0

Met. Career & Tech. School 12,616,028 - Shift to Stabilization Funding -

12,616,028 - - 12,616,028 0

Administration of the Comp. Education Strategy 20,063,593Personnel-Salary & Benefits (41,910) Contracted Professional Services 116,164 Operating Supplies and Expenses 77,895 Grants (92,784) Capital (31,465) Aid to Locals (66,573) Transfer to Education Aid for Pre-K Demo (700,000)

20,063,593 (738,673) 19,324,920 738,673

Statewide Changes (150,306)

Total 856,068,541 - (8,654,346) 847,414,195 8,654,346

Higher Education Board of Governors/Office of Higher Educati 6,973,398Personnel-Salary & Benefits 246,161 Contracted Professional Services (46,303) Operating Supplies and Expenses (238,550) Assistance and Grants (52,600) Capital Purchases (1,330) Operating Transfers

6,973,398 (92,622) 6,880,776 92,622

University of Rhode Island 56,618,919Personnel-Salary & Benefits 772,858 Contracted Professional Services (6,714) Operating Supplies and Expenses (893,073) Assistance and Grants - Capital Purchases 128,785 Debt Service 15,967,304 (960,577)

72,586,223 (958,721) 71,627,502 958,721

B-14



Rhode Island College 37,567,515Personnel-Salary & Benefits 440,684 Contracted Professional Services (43,657) Operating Supplies and Expenses 21,854 Assistance and Grants (192,726) Capital Purchases (59,915) Operating TransfersDebt Service 1,972,215 (35,527)

39,539,730 130,713 39,670,443 (130,713)

Community College of Rhode Island 42,884,078Personnel-Salary & Benefits (59,232) Contracted Professional Services 80,841 Operating Supplies and Expenses (12,807) Assistance and Grants 99,291 Capital Purchases (183,567) Debt Service 1,623,414 (37,545)

44,507,492 (113,019) 44,394,473 113,019

Total 163,606,843 - (1,033,649) 162,573,194 1,033,649

RI Council On The Arts 665,871 Personnel-Salary & Benefits 15,287 Contracted Professional Services (7,500) Operating Supplies and Expenses (3,847) Grants 1,002,475 - Capital Purchases 15,000

Total 1,668,346 - 18,940 1,687,286 (18,940)

RI Atomic Energy Commission 875,781Personnel-Salary & Benefits (537) Contracted Professional Services 1,749 Operating Supplies and Expenses (15,962)

Total 875,781 - (14,750) 861,031 14,750

RI Higher Education Assistance Authority 6,723,347 Personnel-Salary & Benefits (8,523) Contracted Professional ServicesOperating Supplies and Expenses 26,362 Capital (1,000) Scholarships 580,000

Total 6,723,347 - 596,839 7,320,186 (596,839)

RI Historical Preservation & Heritage Commis 1,348,717 Personnel-Salary & Benefits 44,892 Contracted Professional Services (2,290) Operating Supplies and Expenses 11,200 Flood Damage (25%) - Grants - Capital -

Total 1,348,717 - 53,802 1,402,519 (53,802)

RI Public Telecommunications Authority 1,035,967Personnel-Salary & Benefits (55,942)

B-15



Contracted Professional Services 1,300Operating Supplies and Expenses (2,000)

Total 1,035,967 - (56,642) 979,325 56,642

Sub-Total Education 1,031,327,542 - (9,089,806) 1,022,237,736 9,089,806

Public Safety

Attorney GeneralCriminal 13,048,850

Personnel-Salary & Benefits (127,236) Contracted Professional Services (10,562) Operating Supplies and Expenses 36,830 Capital Purchases and Equipment (7,669)

13,048,850 - (108,637) 12,940,213 108,637

Civil 4,297,585Personnel-Salary & Benefits (55,124) Contracted Professional Services (5,657) Tobacco Litigation 500,000 Operating Supplies and Expenses 5,835 Capital Purchases and Equipment (5,621)

4,297,585 - 439,433 4,737,018 (439,433)

Bureau of Criminal Identification 1,075,046Personnel-Salary & Benefits (15,366) Contracted Professional Services (2,385) Operating Supplies and Expenses (12,062) Capital Purchases and Equipment 1,698

1,075,046 - (28,115) 1,046,931 28,115

General 2,788,249Personnel-Salary & Benefits (6,607) Transition Expenses 27,396 Contracted Professional Services 509 Operating Supplies and Expenses 5,729 Capital Purchases and Equipment 101

2,788,249 - 27,128 2,815,377 (27,128)


Total 21,209,730 - 233,636 21,443,366 (233,636)

Corrections Central Management 8,071,545

Personnel-Salary & Benefits Other (322,209) RIBCO Wage Adjustment 26,946 Adjustment for Filling Vacancies 191,265 Contracted Professional Services Other 3,603 Time Tracking/Livescan 209,000 CO Training Class-Contract Services (61,008) Legal Costs RIBCO Arbitration 32,305 Operating Supplies and Expenses Other (56,983) MIS Savings, Time Tracking (100,000) Radio Supplies/Maintenance Costs Transfer (73,515) Capital-Computer Equipment 14,400

8,071,545 - (136,196) 7,935,349 136,196

B-16



Parole Board 1,336,212Personnel-Salary & Benefits (45,436) Contracted Professional Services (5,005) Other Operating/Grants/Capital (10,865)

1,336,212 - (61,306) 1,274,906 61,306

Institutional Corrections 155,261,526Personnel-Salary & Benefits Other (2,813,995) Adjustment for Filling Vacancies 606,859 RIBCO Wage Adjustment 3,216,633 OT adjustment 621,673 SCAAP (180,823) Contracted Professional Services Other 60,393 Inmate Medical Services-Inpatient (680,877) Clerical Services 144,727 Operating Supplies and Expenses Other (131,130) Inmate Per Diem Expenses-Other Operating (91,246) Inmate Per Diem-Food 248,503 Inmate Per Diem-Pharmaceuticals (747,180) Maintenance/Waste Disposal/Sanding (92,284) Radio Supplies/maintenance Costs Transfer 73,515 Staff Clothing (75,000) Lease Financing (162,965) Grants Other (17,924) Inmate Outpatient/Residential Services 1,009,333 Capital-Motor Vehicles -

155,261,526 - 988,212 156,249,738 (988,212)

Community Corrections 13,660,118Personnel-Salary & Benefits Other (20,338) Adjustment for Filling Vacancies 192,696 RIBCO Wage Adjustment 20,209 Contracted Professional Services-Victims' Services (21,432) Operating Supplies and Expenses Other 4,742 Property/Equipment Rental Costs 94,012

13,660,118 - 269,889 13,930,007 (269,889)


Total 178,329,401 - 232,164 178,561,565 (232,164)

Judiciary Supreme Court 28,682,382 -

Personnel-Salary & Benefits 247,054 Contracted Professional Services (800,991) Operating Supplies and Expenses 708,780 Judges Pensions (815) Other Grants 281,722 Capital Purchases and Equipment (138,225)

28,682,382 - 297,525 28,979,907 (297,525)

Superior Court 20,407,009 -Personnel-Salary & Benefits (130,554) Contracted Professional Services 11,493 Operating Supplies and Expenses 330,018 Grants 9,684 Judges Pensions (156,485) Capital 70,132

20,407,009 - 134,288 20,541,297 (134,288)

B-17



Family Court 17,506,835 -Personnel-Salary & Benefits (1,595,828) Contracted Professional Services 233,927 Operating Supplies and Expenses 633,718 Judges Pensions 40,768 Grants 13,960 Capital 128,595

17,506,835 - (544,860) 16,961,975 544,860

District Court 10,248,515Personnel-Salary & Benefits 148,268 Contracted Professional Services 98,906 Operating Supplies and Expenses 176,568 Judges Pensions 15,387 Other Grants 23,464 Capital 48,292

10,248,515 - 510,885 10,759,400 (510,885)

Traffic Tribunal 7,620,894Personnel-Salary & Benefits (220,101) Contracted Professional Services 136,583 Operating Supplies and Expenses 27,966 Judges Pensions (22,214) Capital Purchases and Equipment 45,226

7,620,894 - (32,540) 7,588,354 32,540

Judicial Tenure and Discipline 109,620Personnel-Salary & Benefits (75) Contracted Professional Services (8,000) Operating Supplies and Expenses (1,399)

109,620 (9,474) 100,146 9,474


Total 84,575,255 - (182,828) 84,392,428 182,828

Military Staff National Guard 1,446,704

Personnel-Salary & Benefits - Guard Activation-Payroll 75,656 Contracted Professional Services 10,950 Maintenance/Repairs (56,851) Electricity 120,115 Armorers' Expense 15,000 Guard Activation-OperatingOther Operating (26) Life Insurance (10,000) Funeral Honors 6,400

1,446,704 - 161,244 1,607,948 (161,244)

Emergency Management 1,335,731Personnel-Salary & Benefits (2,888) RISCON Maintenance Contracts 223,752 Indirect Cost Recovery 481,224 Operating Supplies and Expenses 29,128 Flood Related Expenses - State Match 500,000

1,335,731 - 1,231,216 2,566,947 (1,231,216)


B-18



Total 2,782,435 - 1,383,710 4,166,145 (1,383,710)

Public Safety Central Management 712,968

Personnel-Salary & Benefits (6,734) 712,968 - (6,734) 706,234 6,734

E-911 Emergency Telephone System 4,655,752Personnel-Salary & Benefits 34,997 Contracted Professional Services 23,828 Operating Supplies and Expenses 6,936 Capital 152,196

4,655,752 - 217,957 4,873,709 (217,957)

State Fire Marshal 2,461,060Personnel-Salary & Benefits 59,870 Contracted Professional Services 200 Operating Supplies and Expenses (7,570) Capital 3,000

2,461,060 - 55,500 2,516,560 (55,500)

Security Services 3,308,669Personnel-Salary & Benefits (126,553) Contracted Professional Services 500 Operating Supplies and Expenses (3,696)

3,308,669 - (129,749) 3,178,920 129,749

Municipal Police Training Academy 334,567Personnel-Salary & Benefits 2,309 Contracted Professional ServicesOperating Supplies and Expenses -

334,567 - 2,309 336,876 (2,309)

State Police 55,551,474Personnel-Salary & Benefits 203,374 Contracted Professional Services 3,664 Operating Supplies and Expenses (252,901) Indirect Costs for Federal Grants 375,345 State Trooper Pensions 1,217,921 Capital 293,105 Dispatch Unit to DEM (193,576)

55,551,474 - 1,646,932 57,198,406 (1,646,932)


Total 67,024,490 1,540,782 68,565,272 (1,540,782)

Office Of Public Defender 9,590,261 Personnel-Salary & Benefits (67,155) Contracted Professional Services 15,843 Operating Supplies and Expenses 2,499

Total 9,590,261 - (48,813) 9,541,448 48,813

Sub-Total Public Safety 363,511,572 - 3,158,652 366,670,224 (3,158,652)

Natural Resources

Environmental Management

B-19



Office of the Director 4,635,985Personnel-Salary & Benefits 25,561 Contracted Professional Services (5,000) Operating Supplies and Expenses (88,493) Capital Purchases and Equipment 1,430

4,635,985 - (66,502) 4,569,483 66,502

Bureau of Natural Resources 17,797,447Personnel-Salary & Benefits 152,020 Contracted Professional Services (137,740) Operating Supplies and Expenses (268,968) Flood Related Expenditures - 25% State ShareAssistance and Grants 111,447 Capital Purchases and Equipment - Dispatch 193,573

17,797,447 - 50,332 17,847,779 (50,332)

Environmental Protection 11,969,897Personnel-Salary & Benefits 95,963 Contracted Professional Services (44,500) Operating Supplies and Expenses (5,264) Capital Purchases and Equipment -

11,969,897 - 46,199 12,016,096 (46,199)


Total 34,403,329 - (135,135) 34,268,194 135,135

Coastal Resources Management Council 2,038,515 Personnel-Salary & Benefits 22,162 Contracted Professional Services - Legal - Operating Supplies and Expenses 2,526

Total 2,038,515 - 24,688 2,063,203 (24,688)

State Water Resources Board 1,316,540Personnel-Salary & Benefits 5,622 Contracted Professional Services (12,000) Coventry PILOT Payment 100 Operating Supplies and Expenses (11,900)

Total 1,316,540 - (18,178) 1,298,362 18,178

Sub-Total Environment 37,758,384 - (128,625) 37,629,759 128,625

Statewide General Revenue Total 2,942,118,704 3,364,847 19,821,403 2,965,304,954 (23,186,250)

B-20

Summary of Changes to FY 2011 Enacted General Revenue ExpendituresRedistribution Other Total

FY 2011 Reappropriation of Pension Reform Changes Projected ProjectedEnacted Savings Changes Expenditures

General Government Administration 324,063,375 - $5,324,070 ($3,458,666) 1,865,404 325,928,779 Business Regulation 9,156,047 - ($47,913) ($188,779) (236,692) 8,919,355 Labor and Training 7,117,031 - ($14,971) ($96,447) (111,418) 7,005,613 Department of Revenue 35,479,085 - ($144,940) $796,505 651,565 36,130,650 Legislature 37,474,136 3,364,847 ($138,166) ($3,730,726) (504,045) 36,970,091 Lieutenant Governor 924,479 - ($4,993) ($30,386) (35,379) 889,100 Secretary of State 6,908,707 - ($24,941) ($129,549) (154,490) 6,754,217 General Treasurer 2,270,649 - ($9,972) ($7,063) (17,035) 2,253,614 Board of Elections 3,957,971 - ($5,786) ($732,353) (738,139) 3,219,832 Rhode Island Ethics Commission 1,482,659 - ($7,188) ($20,602) (27,790) 1,454,869 Governor's Office 4,752,606 - ($24,029) ($313,672) (337,701) 4,414,905 Commission for Human Rights 1,014,978 - ($4,499) $212,068 207,569 1,222,547 Public Utilities Commission - - $0 $0 - -

Subtotal - General Government 434,601,723 3,364,847 4,896,672 (7,699,670) 561,849 435,163,572

Human ServicesOffice of Health & Human Services 3,420,163 - ($18,445) $139,394 120,949 3,541,112 Children, Youth, and Families 153,046,095 - ($265,404) $92,758 (172,646) 152,873,449 Elderly Affairs 10,100,599 - ($5,945) ($446,415) (452,360) 9,648,239 Health 27,624,903 - ($107,599) $805,272 697,673 28,322,576 Human Services 715,328,654 - ($196,736) $21,434,439 21,237,703 736,566,357 Behavioral Health, Developmental Disabili 163,684,244 - ($204,959) $7,449,755 7,244,796 170,929,040 Office of the Child Advocate 543,822 - ($2,929) $15,154 12,225 556,047 Comm. on Deaf & Hard of Hearing 362,824 - ($1,606) $3,584 1,978 364,802 RI Developmental Disabilities Council - - $0 $0 - - Governor's Commission on Disabilities 367,229 - ($1,902) ($2,019) (3,921) 363,308 Office of the Mental Health Advocate 440,950 - ($2,384) $167 (2,217) 438,733

Subtotal - Human Services 1,074,919,483 - (807,909) 29,492,089 28,684,180 1,103,603,663

EducationElementary and Secondary 856,068,541 - ($150,222) ($8,504,124) (8,654,346) 847,414,195 Higher Education - Board of Governors 163,606,843 - ($99,021) ($934,628) (1,033,649) 162,573,194 RI Council on the Arts 1,668,346 - ($3,365) $22,305 18,940 1,687,286 RI Atomic Energy Commission 875,781 - ($4,652) ($10,098) (14,750) 861,031 Higher Education Assistance Authority 6,723,347 - ($2,125) $598,964 596,839 7,320,186 Historical Preservation & Heritage Comm 1,348,717 - ($5,558) $59,360 53,802 1,402,519 Public Telecommunications Authority 1,035,967 - ($5,370) ($51,272) (56,642) 979,325

Subtotal - Education 1,031,327,542 - (270,313) (8,819,493) (9,089,806) 1,022,237,736

Public SafetyAttorney General $21,209,730 - ($108,677) $342,313 233,636 21,443,366 Corrections 178,329,401 - ($637,010) $869,174 232,164 178,561,565 Judicial 84,575,255 - ($790,396) $607,569 (182,828) 84,392,428 Military Staff 2,782,435 - ($8,352) $1,392,062 1,383,710 4,166,145 Public Safety 67,024,490 - ($268,518) $1,809,300 1,540,782 68,565,272 Office Of Public Defender 9,590,261 - ($47,611) ($1,202) (48,813) 9,541,448

Subtotal - Public Safety 363,511,572 - (1,860,564) 5,019,216 3,158,652 366,670,224

Environmental Management 34,403,329 - ($126,721) ($8,414) (135,135) 34,268,194 Coastal Resources Management Council 2,038,515 - ($10,801) $35,489 24,688 2,063,203 Water Resources Board 1,316,540 - ($3,816) ($14,362) (18,178) 1,298,362

Subtotal - Natural Resources 37,758,384 - (141,338) 12,713 (128,625) 37,629,759

Total 2,942,118,704 3,364,847 1,816,548 18,004,855 23,186,250 2,965,304,954

B-21

Appendix C Aid to Cities and

Towns

Formula Aid to Cities and Towns The Governor’s FY 2012 budget recommends formula aid to cities and towns totaling $114.5 million. This represents a 28.1 percent, or $25.1 million increase from the FY 2011 enacted level of funding. The tables on the following pages display the FY 2009 and FY 2010 actuals, the FY 2011 enacted, the FY 2011 revised, and the FY 2012 recommended levels of funding for formula aid to cities and towns by community. In general, formula state aid programs were level funded from the revised level with the exception of the motor vehicle tax phase-out program. The narrative below describes each of the programs included on the tables. It should also be noted that updated formula drivers for PILOT and Distressed Community Relief Fund were incorporated for FY 2012. This results in increases and decreases by community depending on changes in relative wealth and other factors which are incorporated in determining entitlements. Public Service Corporation Tax - The tangible personal property of telegraph, cable and telecommunications corporations is exempt from local taxation, but is subject to taxation by the state at the average property tax statewide. For FY 2011 and FY 2012, the Governor recommends level funding the program as no growth is forecasted. Funds collected from this tax are distributed to cities and towns within the state on the basis of the ratio of the city or town population to the population of the state as a whole. Meals and Beverage Local Sales and Use Tax – During the January 2003 session, the General Assembly enacted a one percent gross receipts tax on retail sales of meals and beverages in or from eating and/or drinking establishments. The taxes are collected by the Division of Taxation and distributed at least quarterly to the city or town where the meals and beverages were delivered. For FY 2011, the Governor recommends level funding the program as no growth is forecasted and for FY 2012 the Governor recommends $19.3 million. Payment in Lieu of Taxes - Legislation creating this program requires the State of Rhode Island to reimburse cities and towns for property taxes that would have been due on certain types of real property that are exempted from taxation by state law. This includes property owned by nonprofit educational institutions, nonprofit hospitals, or any state owned hospital, veteran’s facility, or correctional facility. The program was fully funded in FY 2007. Since FY 2008, state appropriations for the PILOT program have equaled less than 27 percent of all tax that would have been collected had the property been taxable. The Governor’s recommendation is to level fund the program at the FY 2011 enacted level of $27.6 million for the FY 2011 revised and FY 2012 budgets. Entitlements by community have been adjusted to reflect revenue which would have been lost resulting from eligible properties in the statutory reference year. Distressed Communities Relief Fund – This program provides state assistance to those Rhode Island communities with the highest property tax burdens relative to the wealth of taxpayers. The amount of total funding distributed under this program is based on the amount enacted in the annual appropriations act. Entitlements for FY 2011 and FY 2012 by community reflect computations based upon the latest available qualifying data. For the FY 2011 revised budget, an additional amount of $5.2 million is provided for a total of $15.6 million and in FY 2012 a total of $10.4 million is provided. Motor Vehicle Excise Tax - Legislation enacted during the 1999 General Assembly provides for a phase-out of the local excise tax on motor vehicles and trailers. This legislation was amended in 2002 to make the full phase out of the tax subject to the annual review and appropriation of the General Assembly. For fiscal year 2007, the value of the exemption from local taxes was increased to $6,000 per vehicle. For FY 2009, the legislation was amended to reimburse only 98 percent of the exemption value, reflecting comparability with municipal motor vehicle tax collection rates. For FY 2011 and thereafter, the General

C-1

Formula Aid to Cities and Towns Assembly enacted legislation that mandates a $500 exemption for which the state will reimburse municipalities and amount subject to appropriation. The legislation further allows municipalities to provide an additional exemption, however, that additional exemption will not be subject to reimbursement. The legislation also removed the provision that restricted municipalities from taxing the difference in the event that the value of a vehicle is higher than the prior fiscal year. It also allowed for rates to be lowered from the current frozen levels. The Governor’s recommendation is to level fund the program at the FY 2011 enacted level of $10.0 million for the FY 2011 revised and the FY 2012 budget. Municipal Accountability Stability Transparency Fund - The Municipal Accountability, Stability and Transparency (MAST) Fund is a new fund proposed for FY 2012 to help enhance fiscally prudent budgeting practices for cities and towns, and address unfunded liabilities for pensions and Post Employment Benefits Other Than Pensions (OPEB). Cities and towns will receive additional state aid starting in FY 2012, and thereafter, if they comply with certain requirements as set forth in statute. The Governor recommends $19.3 million in FY 2012 for this program. The following tables reflect this new fund under appropriated aid. Although the funding is included in the appropriations act as a restricted receipt, funds will only be disbursed to communities complying with the requirements set forth in statute. State Library Aid - This program provides financial support for local public library services and for the construction and capital improvement of any free public library. A portion of library aid is disbursed directly to local libraries, including private libraries, while other aid is disbursed to the individual cities and towns. The Governor’s recommendation is to level fund the program at the FY 2011 enacted level of $8.7 million for the FY 2011 revised and FY 2012 budgets. Although total funding is level funded at the FY 2011 enacted level, distributions by community/library have been calculated based upon the latest available qualifying data from the statutory reference year. Library construction aid is fully funded in both years based on outstanding commitments. Central Falls Stabilization Payment - The Governor’s recommendation includes a Central Falls Stabilization Payment of $1.8 million for the FY 2011 revised and $4.9 million in the FY 2012 budget.

C-2

Fiscal Year 2011 Revised State Aid to Cities and TownsPayment Distressed State Motor Vehicle Municipal FY 2011 Total

City or Town In Lieu of Community Library Excise Tax Accountability AppropriatedTax Exempt Relief Fund Aid Reimbursement Stability State Aid

Property Value of Exemption Transparency FundBarrington 48,984 - 323,140 245,208 - 617,332 Bristol 580,241 - 106,449 117,205 - 803,895 Burrillville 66,573 708,688 124,196 214,709 - 1,114,166 Central Falls 19,158 363,633 76,712 84,330 - 543,833 Charlestown - - 46,444 41,218 - 87,662 Coventry - - 198,364 225,597 - 423,961 Cranston 4,239,850 - 564,855 951,625 - 5,756,330 Cumberland 109 - 242,455 216,513 - 459,077 East Greenwich 7,599 - 107,800 123,478 - 238,877 East Providence 91,188 1,114,116 454,240 445,084 - 2,104,628 Exeter - - 32,685 82,437 - 115,122 Foster 417 - 34,283 69,333 - 104,033 Glocester - - 68,546 94,919 - 163,465 Hopkinton - - 28,903 65,621 - 94,524 Jamestown - - 76,368 36,685 - 113,053 Johnston - - 96,481 382,377 - 478,858 Lincoln - - 179,391 236,662 - 416,053 Little Compton - - 26,702 23,548 - 50,250 Middletown - - 123,398 89,262 - 212,660 Narragansett - - 113,169 95,791 - 208,960 Newport 833,229 - 94,072 138,612 - 1,065,913 New Shoreham - - 364,548 8,132 - 372,680 North Kingstown 5,803 - 246,625 228,200 - 480,628 North Providence 456,364 510,516 154,613 350,127 - 1,471,619 North Smithfield - - 61,584 173,847 - 235,431 Pawtucket 377,406 2,321,986 398,156 664,782 - 3,762,330 Portsmouth - - 99,917 109,483 - 209,400 Providence 19,097,871 7,954,890 1,201,916 1,617,922 - 29,872,599 Richmond - - 21,874 60,200 - 82,074 Scituate - - 92,532 127,207 - 219,739 Smithfield 429,064 - 254,642 281,936 - 965,642 South Kingstown 124,230 - 205,999 172,163 - 502,392 Tiverton - - 90,485 108,700 - 199,185 Warren - - 51,162 82,773 - 133,935 Warwick 957,595 - 657,409 1,156,532 - 2,771,536 Westerly 110,040 - 24,649 230,697 - 365,386 West Greenwich - - 171,415 49,532 - 220,947 West Warwick - 1,394,669 287,122 223,933 - 1,905,724 Woonsocket 134,688 1,208,188 195,110 373,623 - 1,911,609

Subtotal $27,580,409 $15,576,687 $7,698,411 $10,000,000 - $60,855,507

Statewide Reference Library Resource Grant (Providence) 1,012,378 1,012,378 Library Construction Reimbursement 2,492,974 2,492,974 Motor Vehicle Excise Tax Reimbursement - Fire Districts - -

Total $27,580,409 $15,576,687 $11,203,763 $13,505,352 - $64,360,859

C-3

Fiscal Year 2011 Pass Through Aid to Cities & TownsPublic Service Meals and FY 2010 Total FY 2011 Total

City or Town Corporation Beverage Shared Taxes Shared & Tax Tax State Aid Appropriated Aid

Barrington 182,103 135,553 317,656 934,988 Bristol 243,277 303,168 546,445 1,350,339 Burrillville 171,027 172,887 343,914 1,458,080 Central Falls 204,938 88,173 293,111 836,944 Charlestown 85,091 97,087 182,178 269,840 Coventry 364,531 333,263 697,794 1,121,755 Cranston 858,263 1,321,908 2,180,171 7,936,501 Cumberland 344,739 350,310 695,049 1,154,126 East Greenwich 140,191 428,133 568,324 807,201 East Providence 527,156 729,001 1,256,157 3,360,785 Exeter 65,451 71,128 136,579 251,701 Foster 46,276 17,376 63,652 167,685 Glocester 107,709 54,010 161,719 325,184 Hopkinton 84,842 43,754 128,596 223,120 Jamestown 60,871 80,395 141,266 254,319 Johnston 305,274 429,028 734,302 1,213,159 Lincoln 226,267 609,715 835,982 1,252,035 Little Compton 38,902 39,576 78,478 128,728 Middletown 187,679 561,285 748,964 961,623 Narragansett 177,144 460,758 637,902 846,862 Newport 286,651 1,526,834 1,813,485 2,879,398 New Shoreham 10,935 225,939 236,874 609,554 North Kingstown 285,038 419,321 704,359 1,184,987 North Providence 350,921 344,523 695,444 2,167,063 North Smithfield 114,963 160,440 275,403 510,835 Pawtucket 789,933 633,198 1,423,131 5,185,460 Portsmouth 185,676 166,628 352,304 561,704 Providence 1,879,801 3,961,890 5,841,691 35,714,290 Richmond 78,194 102,635 180,829 262,904 Scituate 111,780 52,460 164,240 383,979 Smithfield 223,182 513,546 736,728 1,702,371 South Kingstown 302,307 536,657 838,964 1,341,356 Tiverton 165,223 151,924 317,147 516,332 Warren 122,997 202,368 325,365 459,300 Warwick 929,063 2,151,135 3,080,198 5,851,733 Westerly 248,658 593,704 842,362 1,207,748 West Greenwich 55,056 95,914 150,970 371,917 West Warwick 320,280 322,737 643,017 2,548,741 Woonsocket 467,996 494,686 962,682 2,874,291

Subtotal $11,350,385 $18,983,046 $30,333,431 $91,188,938

Statewide Reference Library Resource Grant (Providence) 1,012,378 Library Construction Reimbursement 2,492,974 Motor Vehicle Excise Tax Reimbursement - Fire Districts -

Total $94,694,290

C-4

Changes in Formula Aid - FY 2011 Revised vs. FY 2011 Enacted

Payment Distressed State Motor Vehicle Municipal TotalCity or Town In Lieu of Community Library Excise Tax Accountability Appropriated

Tax Exempt Relief Fund Aid Reimbursement Stability DifferenceProperty Transparency Fund

Barrington - - 2,443 3,156 - 5,599 Bristol - - 805 1,510 - 2,315 Burrillville - 221,068 939 5,045 - 227,052 Central Falls - 96,061 580 (551) - 96,089 Charlestown - - 351 886 - 1,237 Coventry - - 1,500 3,837 - 5,337 Cranston - - 4,270 16,375 - 20,645 Cumberland - - 1,833 2,822 - 4,655 East Greenwich - - 815 761 - 1,576 East Providence - 356,511 3,434 (1,556) - 358,388 Exeter - - 247 3,677 - 3,924 Foster - - 260 1,324 - 1,584 Glocester - - 518 1,592 - 2,110 Hopkinton - - 218 1,410 - 1,628 Jamestown - - 577 93 - 670 Johnston - - 729 (5,752) - (5,023) Lincoln - - 1,356 4,810 - 6,166 Little Compton - - 202 (1,744) - (1,542) Middletown - - 933 (454) - 479 Narragansett - - 856 (2,079) - (1,223) Newport - - 711 (2,429) - (1,718) New Shoreham - - 2,756 493 - 3,249 North Kingstown - - 1,865 4,797 - 6,662 North Providence - - 1,169 (8,246) - (7,077) North Smithfield - - 465 4,176 - 4,641 Pawtucket - 804,431 3,010 (7,729) - 799,712 Portsmouth - - 755 2,889 - 3,644 Providence - 2,843,627 (49,116) (118,107) - 2,676,404 Richmond - - 165 2,061 - 2,226 Scituate - - 699 3,458 - 4,157 Smithfield - - 1,926 2,499 - 4,425 South Kingstown - - 1,557 2,903 - 4,460 Tiverton - - 684 694 - 1,378 Warren - - 387 557 - 944 Warwick - - 4,971 82,412 - 87,383 Westerly - - 186 1,050 - 1,236 West Greenwich - - 1,297 416 - 1,713 West Warwick - 468,985 2,172 (3,243) - 467,913 Woonsocket - 401,547 1,475 (3,808) - 399,214

Subtotal - $5,192,229 - - - $5,192,229

Statewide Reference Library Resource Grant (Providence) - - Library Construction Reimbursement (105,059) (105,059) Motor Vehicle Excise Tax Reimbursement - Fire Districts - -

Total - $5,192,229 - (105,059) $5,087,170

C-5

Changes in Pass Through and All Aid - FY 2011 Rev vs. FY 2011 Enacted

Public Service Meals and Total TotalCity or Town Corporation Beverage Pass Through All State Aid

Tax Tax State Aid DifferenceDifference

Barrington - 16,374 16,374 21,973 Bristol - (15,380) (15,380) (13,065) Burrillville - 5,921 5,921 232,973 Central Falls - 5,510 5,510 101,600 Charlestown - (1,799) (1,799) (561) Coventry - 434 434 5,771 Cranston - 4,581 4,581 25,225 Cumberland - 3,762 3,762 8,417 East Greenwich - 38,323 38,323 39,899 East Providence - 18,207 18,207 376,596 Exeter - 8,046 8,046 11,971 Foster - (470) (470) 1,114 Glocester - (3,551) (3,551) (1,442) Hopkinton - 3,875 3,875 5,503 Jamestown - 15,154 15,154 15,824 Johnston - 22,054 22,054 17,031 Lincoln - 24,675 24,675 30,840 Little Compton - 11,999 11,999 10,457 Middletown - (5,464) (5,464) (4,985) Narragansett - (13,210) (13,210) (14,433) Newport - (25,998) (25,998) (27,716) New Shoreham - 17,329 17,329 20,578 North Kingstown - (11,486) (11,486) (4,824) North Providence - (20,826) (20,826) (27,902) North Smithfield - 5,064 5,064 9,706 Pawtucket - (7,444) (7,444) 792,268 Portsmouth - 7,135 7,135 10,779 Providence - 49,615 49,615 2,726,019 Richmond - 1,177 1,177 3,404 Scituate - (2,576) (2,576) 1,581 Smithfield - 33,391 33,391 37,816 South Kingstown - 19,977 19,977 24,437 Tiverton - 5,568 5,568 6,946 Warren - (2,848) (2,848) (1,905) Warwick - (48,072) (48,072) 39,310 Westerly - 3,753 3,753 4,989 West Greenwich - 16,383 16,383 18,096 West Warwick - (7,994) (7,994) 459,920 Woonsocket - 3,624 3,624 402,838

Subtotal - $174,815 $174,815 $5,367,044

Statewide Reference Library Resource Grant (Providence) - Library Construction Reimbursement (105,059) Motor Vehicle Excise Tax Reimbursement - Fire Districts -

Total $174,815 $174,815 $5,261,985

C-6

Fiscal Year 2012 State Aid to Cities and TownsPayment Distressed State Motor Vehicle Municipal FY 2012 Total

City or Town In Lieu of Community Library Excise Tax Accountability AppropriatedTax Exempt Relief Fund Aid Reimbursement Stability State Aid

Property Value of Exemption Transparency FundBarrington 45,230 323,140 245,208 72,326 685,904 Bristol 596,405 106,449 117,205 294,761 1,114,819 Burrillville 96,105 243,867 124,196 214,709 209,443 888,320 Central Falls 19,923 293,509 76,712 84,330 502,285 976,759 Charlestown - 46,444 41,218 121,199 208,861 Coventry - 198,364 225,597 301,545 725,506 Cranston 4,007,827 564,855 951,625 1,613,317 7,137,624 Cumberland 103 242,455 216,513 463,656 922,728 East Greenwich 7,274 107,800 123,478 52,546 291,098 East Providence 127,899 757,468 454,240 445,084 796,907 2,581,599 Exeter - 32,685 82,437 26,908 142,031 Foster 396 34,283 69,333 92,221 196,233 Glocester - 68,546 94,919 168,633 332,098 Hopkinton - 28,903 65,621 67,131 161,655 Jamestown - 76,368 36,685 43,570 156,622 Johnston - 96,481 382,377 759,095 1,237,953 Lincoln - 179,391 236,662 285,094 701,147 Little Compton - 26,702 23,548 31,451 81,701 Middletown - 123,398 89,262 291,055 503,714 Narragansett - 113,169 95,791 262,187 471,147 Newport 777,862 94,072 138,612 548,824 1,559,370 New Shoreham - 364,548 8,132 27,192 399,872 North Kingstown 1,652 246,625 228,200 264,514 740,991 North Providence 421,392 624,043 154,613 350,127 712,975 2,263,149 North Smithfield - 61,584 173,847 195,042 430,473 Pawtucket 362,900 1,534,272 398,156 664,782 1,624,044 4,584,154 Portsmouth - 99,917 109,483 194,571 403,971 Providence 19,267,541 5,143,906 1,201,916 1,617,922 4,607,238 31,838,524 Richmond - 21,874 60,200 44,080 126,154 Scituate - 92,532 127,207 134,538 354,277 Smithfield 444,580 254,642 281,936 554,964 1,536,122 South Kingstown 133,925 205,999 172,163 301,889 813,976 Tiverton - 90,485 108,700 192,059 391,244 Warren - 51,162 82,773 149,238 283,172 Warwick 1,034,893 657,409 1,156,532 1,448,195 4,297,028 Westerly 107,319 24,649 230,697 225,182 587,847 West Greenwich - 171,415 49,532 66,361 287,309 West Warwick - 900,192 287,122 223,933 436,976 1,848,223 Woonsocket 127,183 887,201 195,110 373,623 1,147,020 2,730,136

Subtotal $27,580,409 $10,384,458 $7,698,411 $10,000,000 $19,330,231 $74,993,509

Statewide Reference Library Resource Grant (Providence) 1,012,378 1,012,378 Library Construction Reimbursement 2,821,772 2,821,772 Motor Vehicle Excise Tax Reimbursement - Fire Districts - -

Total $27,580,409 $10,384,458 $11,532,561 $13,834,150 $19,330,231 $78,827,659

C-7

Fiscal Year 2012 Pass Through Aid to Cities & TownsPublic Service Meals and FY 2011 Total FY 2012 Total

City or Town Corporation Beverage Shared Taxes Shared & Tax Tax State Aid Appropriated Aid

Barrington 182,103 138,032 320,135 1,006,039 Bristol 243,277 308,712 551,989 1,666,809 Burrillville 171,027 176,049 347,076 1,235,396 Central Falls 204,938 89,786 294,724 1,271,483 Charlestown 85,091 98,863 183,954 392,815 Coventry 364,531 339,358 703,889 1,429,395 Cranston 858,263 1,346,084 2,204,347 9,341,971 Cumberland 344,739 356,716 701,455 1,624,183 East Greenwich 140,191 435,964 576,155 867,252 East Providence 527,156 742,334 1,269,490 3,851,089 Exeter 65,451 72,429 137,880 279,910 Foster 46,276 17,694 63,970 260,202 Glocester 107,709 54,998 162,707 494,805 Hopkinton 84,842 44,555 129,397 291,051 Jamestown 60,871 81,866 142,737 299,359 Johnston 305,274 436,874 742,148 1,980,101 Lincoln 226,267 620,867 847,134 1,548,281 Little Compton 38,902 40,300 79,202 160,903 Middletown 187,679 571,550 759,229 1,262,943 Narragansett 177,144 469,185 646,329 1,117,475 Newport 286,651 1,554,758 1,841,409 3,400,779 New Shoreham 10,935 230,071 241,006 640,878 North Kingstown 285,038 426,990 712,028 1,453,019 North Providence 350,921 350,824 701,745 2,964,893 North Smithfield 114,963 163,375 278,338 708,811 Pawtucket 789,933 644,778 1,434,711 6,018,865 Portsmouth 185,676 169,675 355,351 759,322 Providence 1,879,801 4,034,350 5,914,151 37,752,675 Richmond 78,194 104,512 182,706 308,861 Scituate 111,780 53,419 165,199 519,476 Smithfield 223,182 522,939 746,121 2,282,243 South Kingstown 302,307 546,472 848,779 1,662,755 Tiverton 165,223 154,703 319,926 711,170 Warren 122,997 206,069 329,066 612,239 Warwick 929,063 2,190,477 3,119,540 7,416,569 Westerly 248,658 604,562 853,220 1,441,067 West Greenwich 55,056 97,668 152,724 440,033 West Warwick 320,280 328,640 648,920 2,497,143 Woonsocket 467,996 503,734 971,730 3,701,866

Subtotal $11,350,385 $19,330,231 $30,680,616 $105,674,125

Statewide Reference Library Resource Grant (Providence) 1,012,378 Library Construction Reimbursement 2,821,772 Motor Vehicle Excise Tax Reimbursement - Fire Districts -

Total $109,508,275

C-8

Changes in Formula Aid - FY 2012 vs. FY 2011 RevisedPayment Distressed State Motor Vehicle Municipal Total

City or Town In Lieu of Community Library Excise Tax Accountability AppropriatedTax Exempt Relief Fund Aid Reimbursement Stability Difference

Property Value of Exemption Transparency FundBarrington (3,754) - - - 72,326 68,572 Bristol 16,164 - - - 294,761 310,925 Burrillville 29,532 (464,821) - - 209,443 (225,846) Central Falls 765 (70,125) - - 502,285 432,926 Charlestown - - - - 121,199 121,199 Coventry - - - - 301,545 301,545 Cranston (232,023) - - - 1,613,317 1,381,294 Cumberland (6) - - - 463,656 463,650 East Greenwich (325) - - - 52,546 52,221 East Providence 36,711 (356,647) - - 796,907 476,971 Exeter - - - - 26,908 26,908 Foster (21) - - - 92,221 92,200 Glocester - - - - 168,633 168,633 Hopkinton - - - - 67,131 67,131 Jamestown - - - - 43,570 43,570 Johnston - - - - 759,095 759,095 Lincoln - - - - 285,094 285,094 Little Compton - - - - 31,451 31,451 Middletown - - - - 291,055 291,055 Narragansett - - - - 262,187 262,187 Newport (55,367) - - - 548,824 493,457 New Shoreham - - - - 27,192 27,192 North Kingstown (4,151) - - - 264,514 260,363 North Providence (34,972) 113,527 - - 712,975 791,529 North Smithfield - - - - 195,042 195,042 Pawtucket (14,506) (787,714) - - 1,624,044 821,824 Portsmouth - - - - 194,571 194,571 Providence 169,670 (2,810,984) - - 4,607,238 1,965,925 Richmond - - - - 44,080 44,080 Scituate - - - - 134,538 134,538 Smithfield 15,516 - - - 554,964 570,480 South Kingstown 9,695 - - - 301,889 311,584 Tiverton - - - - 192,059 192,059 Warren - - - - 149,238 149,238 Warwick 77,298 - - - 1,448,195 1,525,493 Westerly (2,721) - - - 225,182 222,461 West Greenwich - - - - 66,361 66,361 West Warwick - (494,477) - - 436,976 (57,501) Woonsocket (7,505) (320,987) - - 1,147,020 818,527

Subtotal - ($5,192,229) - - $19,330,231 $14,138,002

Statewide Reference Library Resource Grant (Providence) - - Library Construction Reimbursement 328,798 328,798 Motor Vehicle Excise Tax Reimbursement - Fire Districts - -

Total - ($5,192,229) $328,798 - $19,330,231 $14,466,800

C-9

Changes in Pass Through and All Aid - FY 2012 vs. FY 2011 Revised

Public Service Meals and Total TotalCity or Town Corporation Beverage Pass Through All State Aid

Tax Tax State Aid DifferenceDifference

Barrington - 2,479 2,479 71,051 Bristol - 5,545 5,545 316,469 Burrillville - 3,162 3,162 (222,684) Central Falls - 1,613 1,613 434,538 Charlestown - 1,776 1,776 122,975 Coventry - 6,095 6,095 307,641 Cranston - 24,177 24,177 1,405,470 Cumberland - 6,407 6,407 470,057 East Greenwich - 7,830 7,830 60,051 East Providence - 13,333 13,333 490,304 Exeter - 1,301 1,301 28,209 Foster - 318 318 92,517 Glocester - 988 988 169,621 Hopkinton - 800 800 67,931 Jamestown - 1,470 1,470 45,040 Johnston - 7,847 7,847 766,942 Lincoln - 11,151 11,151 296,245 Little Compton - 724 724 32,175 Middletown - 10,265 10,265 301,320 Narragansett - 8,427 8,427 270,614 Newport - 27,925 27,925 521,381 New Shoreham - 4,132 4,132 31,324 North Kingstown - 7,669 7,669 268,032 North Providence - 6,301 6,301 797,830 North Smithfield - 2,934 2,934 197,976 Pawtucket - 11,581 11,581 833,405 Portsmouth - 3,047 3,047 197,619 Providence - 72,460 72,460 2,038,385 Richmond - 1,877 1,877 45,957 Scituate - 959 959 135,497 Smithfield - 9,392 9,392 579,872 South Kingstown - 9,815 9,815 321,400 Tiverton - 2,779 2,779 194,838 Warren - 3,701 3,701 152,939 Warwick - 39,343 39,343 1,564,835 Westerly - 10,858 10,858 233,319 West Greenwich - 1,754 1,754 68,116 West Warwick - 5,903 5,903 (51,599) Woonsocket - 9,047 9,047 827,575

Subtotal - $347,185 $347,185 $14,485,187

Statewide Reference Library Resource Grant (Providence) - Library Construction Reimbursement 328,798 Motor Vehicle Excise Tax Reimbursement - Fire Districts -

Total $347,185 $347,185 $14,813,985

C-10

Summary of Formula Aid to Cities and Towns

FY 2009 FY 2010 FY 2011 FY 2011 FY 2012Actual Actual Enacted Revised Recommend

Public Service Corporation Tax 9,204,590 10,194,401 11,350,385 11,350,385 11,350,385 Meals and Beverage Tax 18,808,231 18,983,046 18,808,231 18,808,231 19,330,231 Payment In Lieu of Taxes (PILOT) 27,580,239 27,580,407 27,580,409 27,580,409 27,580,409 Total Miscellaneous Aid $55,593,060 $56,757,854 $57,739,025 $57,739,025 $58,261,025

General Revenue Sharing 25,000,000 - - - - Total State Aid to Cities and Towns $25,000,000 - - - -

Central Falls Stabilization Payment - - - 1,800,000 4,900,000 Dist. Comm. - General Appropriation 10,384,458 10,384,458 10,384,458 15,576,687 10,384,458 Total Distressed Communities Aid $10,384,458 $10,384,458 $10,384,458 $17,376,687 $15,284,458

Motor Vehicle Tax Phase-out Program 1 135,376,122 117,179,992 10,000,000 10,000,000 10,000,000 Total Motor Vehicle Tax Phase-out Prog. $135,376,122 $117,179,992 $10,000,000 $10,000,000 $10,000,000

Municipal Accountability Stability Transparency Fund - - - - 19,330,231 Total - Municipal Accountability Stability Transparency Fund - - - - $19,330,231

Subtotal Formula Aid - All Sources $226,353,640 $184,322,304 $78,123,483 $85,115,712 $102,875,714Percent Change from prior year -11.98% -18.57% -65.49% -53.82% 20.87%

Resource Sharing & Library Aid 2 8,773,284 8,773,023 8,773,398 8,773,398 8,773,398 Library Construction Aid 2,587,447 2,739,488 2,492,974 2,492,974 2,821,772 Total Library Aid $11,360,731 $11,512,511 $11,266,372 $11,266,372 $11,595,170

Property Revaluation Program 1,044,654 1,531,211 790,000 790,000 1,125,000 Total Other Aid $1,044,654 $1,531,211 $790,000 $790,000 $1,125,000

Total Aid $238,759,025 $197,366,026 $90,179,855 $97,172,084 $115,595,884Percent Change from prior year -11.46% -17.34% -62.23% -50.77% 18.96%

1 Amounts for the Motor Vehicle Excise Tax represent final payments due each community based upon the exemption amounts in effect for the given fiscal year. Actual cash payments may have occurred over multiple fiscal years.2 Resource Sharing and Library Aid for state institutions is included in these totals.

C-11

Appendix D Aid to Schools

Education Aid to Local Governments Education Aid to Local Governments totals $849.2 million in FY 2012, a $21.0 million increase in total state funding relative to the FY 2011 revised budget, a 2.5 percent increase. Total Education Aid is defined to include local public schools, the School for the Deaf, Davies Career and Technical School, the Charter Schools, the Central Falls School District and the Metropolitan Career and Technical School, as well as support for the state share of teacher retirement and school Housing Aid. Fiscal year 2012 represents year one of the new education aid funding formula. Beginning July 1, 2011, education aid to all districts, charter schools and state schools (Davies and the Met) will be formula based. The School for the Deaf is a special education program and the funding method will not change since it already has a state, federal and local share. Based on the principle that the money follows the student, the formula was developed with the following guiding principles: (1) Build a strong foundation for all children; (2) improve equity among districts and schools; (3) be transparent; and (4) be financially responsible. The funding formula has been designed to distribute aid based on three key components:

• Core Instructional Amount – ($8,333 per student in FY 2012) Derived from a regional average of the National Center for Education Statistics (NCES) expenditure data, the core instructional amount is based on cost studies from states that have been deemed by education researchers to be best practice financial models or states. In order to be informed, objective, and geographically sensitive, the formula uses a New England average cost to provide a balanced perspective on what Rhode Island should be spending to provide a high quality of education. The core instruction amount accounts for costs that have the greatest impact on a child’s ability to learn, including instruction, instructional support, and leadership costs.

• Student Success Factor – ($3,333 per student in FY 2012) Provides additional funding to support student needs beyond the core services listed above with the ultimate goal of closing student achievement gaps. Within the formula, each student is entitled to a 40% student success factor which is applied to the core instructional amount. This factor is also applied to PK-12 students who are eligible for free and reduced price lunch.

• State Share Ratio – After the core components have been determined, a state share ratio formula is applied to address two key questions: How to account for differences in the revenue-generation capacity of communities and how to allocate funding to communities based on the supports that students need. The state share ratio is dependent on district property values weighted for median family income and students eligible for free and reduced price lunch.

Data plays a crucial role in how education aid is distributed to districts, charter schools, Davies, and the Met. The funding formula will incorporate annual student data updates as well as the most recently assessed community property values and median family income data in order to ensure a solid methodology towards aid distribution. The formula establishes a platform for creating horizontal equity. It attempts to get a like amount of funding to children who have similar characteristics regardless of where they sit, which in turn gradually rebalances education funding to provide all districts a common level of purchasing power. In addition, specific categorical funds for certain high-cost items were established outside the formula distribution: High cost special education, career and technical education, an early childhood Pre-K program, transportation for non-public and regional districts, as well as regional district bonuses. A Central Falls Stabilization Fund has also been created to assure that appropriate funding is available to support the district, due to concerns regarding local capacity.

D-1

Education Aid to Local Governments According to law, state stabilization funds are only paid upon transfer of a matching amount to the school district by the city. If Central Falls is unable to pay its share, the State will not provide funding under the stabilization fund. Lastly, funding allocations will be phased in over ten years based on a transition model where in overfunded districts shall have a level decrease period, while underfunded districts shall have a level increase over a seven year period. The following sections summarize changes to the various aid categories that comprise total FY 2012 Education Aid. Distributed Aid Distributed aid in FY 2012 will now reflect aid to both districts and charter schools as a result of the education aid funding formula. Please note that in prior years, charter schools have been displayed within the non-distributed aid category of the tables. Distributed education aid to districts increases by $1.1 million while charter school aid increases by $3.4 million in general revenue, relative to revised levels. It is worthy to note that Rhode Island has been awarded $32.9 million through a federal Education Jobs Fund Bill. The new education aid formula dictates the exact amount of funding each local education agency (LEA) shall receive per year. In order for each LEA to receive its full level of funding, the Education Jobs Fund will be used to offset any general revenue reductions that occur in FY 2012. Unlike the previous guidelines for State Fiscal Stabilization funding, where the State could dictate when LEAs drew down federal money, terms for this federal fund allow districts to withdraw funds at anytime up and until September 30, 2012. Therefore, $27.0 million has been reflected in the FY 2011 Budget while the FY 2012 Budget reflects $5.9 million. State Schools The State Schools- Davies Career and Technical School, Metropolitan Career and Technical School, and the Rhode Island School for the Deaf are collectively financed at $30.8 million in general revenue, which constitutes a $2.0 million decrease from the revised FY 2011 Budget. The State Schools have also been affected through a reduction in general revenue aid. However, as described above, some reductions in aid will be offset by the Education Jobs Fund. Davies will receive $673,955, the Met will receive $593,721, and the School for the Deaf will receive $283,888 in additional federal funding. Please note that Davies and the Met will also fall under year one of the funding formula. Non-Distributed Aid In FY 2012, charter school aid, as described above, will now be reflected in the distributed aid category of the education aid tables. Also new as a result of the education aid funding formula are “categorical funds”. In FY 2012, $1.1 million is allocated for transportation costs, $700,000 for a Pre-K early childhood demonstration program, and a regionalization bonus of $851,899. Funding will be delayed in FY 2012 for all additional categorical funds created in the education formula legislation, including a high cost special education fund, a career and technical education fund and a Central Falls stabilization fund. General revenue funding for the Telecommunications Access fund is eliminated in FY 2012, to be replaced with a broadening of the fee charged only off land-lines to include wireless phones as well. Also eliminated in FY 2012 is the Textbook Expansion fund, used to finance the acquisition of textbooks for non-public school students.

D-2

Education Aid to Local Governments Other Aid The FY 2012 Budget also includes increases in other aid of $17.5 million; a $4.5 million increase for school housing aid reimbursements and a $13.0 million increase in state contributions for teachers’ retirement. FY 2012 Education Aid Increases (Decreases) From the Revised FY 2011 Budget

• Standard Aid: $4,669,993 • Group Home Funding: ($285,000) • Central Falls School District: ($3,289,352) • Textbook Expansion: ($241,490) • Charter School Aid: $3,359,278 • Progressive Support and Intervention: ($24) • Professional Development: ($248,750) • Telecommunications Access (348,250) • Transportation Categorical: $1,087,840 • Regionalization Bonus: $851,899 • Metropolitan Career and Technical School: ($1,044,041) • School for the Deaf: $42,822 • Davies Career and Technical School: ($1,008,703) • Teachers’ Retirement: $13,017,777 • School Housing Aid: $4,484,171

The following graph displays total school aid from FY 2008 to FY 2012. The “Education Aid” component is comprised of all aid categories under the standard Education Aid program. This includes, but is not limited to, General Aid, Targeted Aid, Charter School Aid, Progressive Support and Intervention, and the Student Investment Initiatives. Other components of total aid include: State Contributions for Teachers’ Retirement; School Housing Aid; Central Falls School District; and State Schools (Davies, Deaf, and the Metropolitan School).

Total Education Aid

$0

$200

$400

$600

$800

$1,000

2008 2009 2010 2011 2012

Fiscal Year

Mill

ions

Education AidHousing AidRetirementState SchoolsCentral Falls

D-3

Education Aid to Local Governments

Housing Aid The School Housing Aid Program reimburses a community for eligible construction expenditures beginning in the fiscal year after the project is completed. The reimbursement rate is based on the cost of the project over the life of the bonds issued for the project. The Commissioner and the Board of Regents review each local community's request for reimbursement through the program. Pursuant to recent legislation, the Department of Education and the Board of Regents promulgated new regulations governing both this process as well as the oversight of all projects eligible for School Housing Aid. In support of this initiative, the Governor recommended and the Generally Assembly approved the addition of three FTE to the Department of Elementary and Secondary Education in FY 2008. It should be noted that although the reimbursement reference for completed projects is one year, there is a two-year reference for formula factors. For example, FY 2010 allocations were based on 2008 wealth and enrollment levels. The housing aid share ratio calculation is based on a district's income adjusted per-pupil property wealth compared to aggregate state per-pupil property wealth. The average state housing aid share ratio is thirty-eight percent, adjusted to ensure a minimum of thirty percent in each community. Beginning FY 2012, the minimum reimbursement to each community shall increase by five percent each year until a forty percent minimum share ratio has been achieved. A four percent bonus is awarded when a minimum of seventy-five percent of a project’s cost is for energy conservation, asbestos removal, or handicapped access. Regional districts receive a two percent bonus for each regionalized grade for new construction projects, and an additional four percent bonus for renovation projects. Reimbursement is based on total expended project cost, plus related bond interest cost, not on the amount of the original bond issuance. For example, if a community issued $6.5 million for ten years for a capital improvement to a school, but only spent $6.0 million, the department would reimburse the community for the State’s appropriate share of the $6.0 million spent on the completed project, plus the bond interest payments over a ten year period. This statute was amended to include the use of lease revenue bonds, financial leases, capital reserve funding, and similar financial instruments to finance school construction. Communities used this amendment to receive project reimbursements commencing in FY 1999. The FY 2004 Appropriation Act amended the housing aid statute to require that all future school construction debt be issued through the Rhode Island Health and Education Building Corporation. The revised FY 2011 and FY 2012 Budget propose general revenue expenditures of $68.0 million and $72.5 million, respectively, for the School Housing Aid program.

Teachers’ Retirement RIGL 16-16-22 requires the State to make contributions to the teacher retirement system in Rhode Island. The State shall contribute a percentage of the employer’s share, with the school districts contributing the balance. The State's share has varied over the years based upon the total actuarially determined rate of payroll, but since FY 1993 it has been fixed at 40 percent, with the municipalities contributing 60 percent. Each district receives the same percentage, regardless of district wealth. The State deferred the State's contributions to Teachers’ Retirement in both FY 1991 and FY 1992. Most municipalities also deferred the local portion of teacher retirement contributions for this period. The state deferrals, valued at $22.4 million in FY 1991 and $22.2 million in FY 1992, will be

D-4

Education Aid to Local Governments financed over twenty years, as will the local deferral. The annual calculation applied to the state contribution to Teachers’ Retirement includes an adjustment to accommodate the deferral liability. Furthermore, the municipalities of Burrillville, East Greenwich, Little Compton, New Shoreham and North Smithfield did not participate in the 1990 early retirement window for teachers and therefore contribute a slightly smaller percentage of teachers’ salaries. Contribution Rates for Teachers’ Retirement Fund Employer Share Actuarial Contribution Local State Sub Teacher Rate of Payroll (60%)* (40%)* Total Share 1999 21.02% 6.62% 4.90% 11.52% 9.5% 2000 24.14% 8.43% 6.21% 14.64% 9.5% 2001 21.51% 6.86% 5.15% 12.01% 9.5% 2002 19.45% 5.73% 4.22% 9.95% 9.5% 2003 21.47% 6.93% 5.04% 11.97% 9.5% 2004 23.22% 7.99% 5.73% 13.72% 9.5% 2005 24.34% 8.72% 6.12% 14.84% 9.5% 2006 25.97% 9.72% 6.75% 16.47% 9.5% 2007 29.14% 11.62% 8.02% 19.64% 9.5% 2008 31.51% 13.04% 8.97% 22.01% 9.5% 2009 29.57% 11.89% 8.18% 20.07% 9.5% 2010 29.57% 11.89% 8.18% 20.07% 9.5% 2011 18.75% 11.25% 7.76% 19.01% 9.5% 2012 22.06% 13.23% 9.09% 22.32% 9.5% * Adjusted for deferral liability The following table displays the state contributions to Teacher Retirement since FY 1999. The State Retirement Board uses the districts' retirement contribution data to calculate the state obligation each month, and contributions are accrued to the appropriate fiscal period. State Contributions for Teacher Retirement Fiscal Year State Share 1999 Actual $30,202,943 2000 Actual $40,719,407 2001 Actual $35,365,234 2002 Actual $30,652,207 2003 Actual $38,242,690 2004 Actual $45,039,269 2005 Actual $48,503,125 2006 Actual $54,537,733 2007 Actual $70,286,753 2008 Actual $83,028,510 2009 Actual $73,592,722 2010 Actual $68,550,306 2011 Revised $69,653,293 2012 Recommended $82,671,070

D-5

Education Aid to Local Governments Explanation of Tables- by Category and LEA The following two tables display education aid first by category, and then by apportionment among the state’s local and regional education agencies (LEAs). “Distributed LEA Aid” consists of the various categories of aid that are directly distributed to school districts on a regular (usually monthly) basis, such as General Aid in FY 2011 and Formula Aid in FY 2012, Targeted Aid, and funds for Student Equity. For completeness, financing of the Central Falls School District (plus an allocation for indirect Charter School Aid on the LEA table only up until FY 2011) is also displayed in this section. “State Schools” include the Metropolitan School, Davies, and School for the Deaf. “Non-Distributed Aid” includes several categories of aid that are either utilized at the departmental level or are not distributed regularly to school districts. “Other Aid” consists of allocations for School Housing Aid and state contributions to the Teachers’ Retirement Fund. For the purposes of these tables, direct aid to charter schools is categorized as non-distributed, up until FY 2011. Starting FY 2012, direct aid to charter schools is categorized as distributed aid as a result of the funding formula.

D-6

Office of Budget Suzanne Amerault Programming Services Officer Personnel Actions Employee Contract Tracking Office Management Catherine Beaumont Budget Analyst I Department of Labor and Training Lieutenant Governor Secretary of State Ethics Commission Board of Elections Andres Blanco Programmer Analyst III Network Database Management Information Processing Liaison Technical Support Web Page Steve Collum Budget Analyst I/Economist Monthly Revenue Report Revenue Estimating, Five Year Forecast Economic Impact Studies Karen DiLauro Budget Analyst II Department of Revenue Department of Transportation Rhode Island Airport Corporation Rhode Island Public Transit Authority Rhode Island Turnpike and Bridge Authority Ryan Gardiner Budget Analyst I Elementary & Secondary Education Public Telecommunication Authority Historical & Heritage Commission R.I. Council on the Arts Quonset Development Corporation

Bill Golas Senior Budget Analyst Public Higher Education Department of Business Regulation Higher Education Assistance Authority Atomic Energy Commission College Crusade of Rhode Island Health and Educational Building Corporation Student Loan Authority Wayne T. Hannon Deputy Budget Officer

Budget Data System Five Year Forecast Colleen HalloranVillandry Budget Analyst II

Department of Administration Department of Public Safety Capital Center Commission Housing Resources Commission Economic Development Corporation Convention Center Authority Rhode Island Housing and Mortgage Finance Corporation Rhode Industrial Facilities Corporation Rhode Island Industrial Recreational Building Authority NASBO Surveys

Elizabeth Leach Supervising Budget Analyst Governor’s Office Legislature Treasury Department Judicial Governor’s Commission on Disabilities Appropriations Act Assessed Fringe Benefit Fund Rhode Island Refunding Bond Agency

Office of Budget Todd Leveillee Budget Analyst I Department of Environmental Management Office of the Attorney General Clean Water Finance Agency Resource Recovery Corporation Dennis A. Michaud Budget Analyst II Department of Corrections Military Staff Coastal Resources Management Council Office of the Public Defender Water Resources Board Narragansett Bay Water Quality Management

District Commission Water Resources Board Corporate Thomas Mullaney Executive Director/State Budget Officer State Employee Retirement Board Information Statement Pension Daniel R. Orgel Principal Budget Analyst Office of Health and Human Services Department of Human Services Department of Veterans’ Affairs Commission on the Deaf and Hard of Hearing Debt Management /Issuance Caseload Estimating

Kimberly Reynolds Budget Analyst II

Department of Behavioral Health, Developmental Disabilities and Hospitals

Department of Children, Youth and Families Child Advocate Mental Health Advocate Sharon R. Savicki Implementation Aide Fiscal Note Database Gregory B. Stack Supervising Budget Analyst Currently serving in the armed forces Theo Toe Budget Analyst II Department of Elderly Affairs Department of Health Commission on Human Rights Public Utilities Commission Financial Integrity Accountability Act Reporting A Special Thanks To: Rosemary Booth Gallogly, Director of Revenue Paul L. Dion, Ph.D., Office of Revenue Analysis Bethany Hordern, Office of Revenue Analysis Sunil Pokharel, Office of Revenue Analysis Peter Dennehy, Office of Legal Services

Documents

FY 2012 Economic Forecast - Office of Management and Budget Year Budgets/Operating...Overview Governor Chafee recommends a budget for fiscal year 2012 totaling $7.661 billion in all